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What Effect Will The 10000 California Homebuyer Tax Credit Have On You In 2010 ?

07/16/2010

The California homebuyer tax credit has met with huge success since it took effect on May 1 this year. First time homebuyers and homebuyers who purchase new or previously unoccupied homes can receive up to $10000 in tax credit from the California state government distributed over three consecutive taxable years. On an individual level, this amounts to $3333 in income retained each year.

California has allocated a total of $200 million in tax credit split equally between two separate programs--a first time homebuyer program and a new home purchase program. The first time homebuyer program has seen the strongest success. Nearly 40% of all recent home sales to first time buyers came as a direct result of the tax credit, according to an analysis by the California Association of Realtors.Those not currently living in california can still take advantage of the federal homebuyer tax credit extension

The Franchise Tax Board, which oversees the California tax credit, reports that they have received over 26,000 applications for the first time homebuyer credit. About 19,000 of these will likely receive varying amounts of the credit. This is significant. By the end of this tax year, nearly 19,000 individuals will retain up to $3333 that would otherwise have disappeared as tax.

A payback of this magnitude will dramatically increase the spending power of new homeowners. At the start of the recession, nearly 30% of homeowners said they planned to put off all home improvement projects indefinitely. Times have changed. According to a survey conducted by American Express in April of this year, 62% of homeowners plan to start home improvement projects during the coming months. This is directly a result of increased new home purchases and increased homeowner spending power.

California hopes to incentive construction jobs as well as jobs in related private sectors by offering this income back to first time homebuyers. The construction and home improvement sectors will likely expand as additional homes are purchased and new homebuyers pour their tax savings into their residences. The recent $8000 federal homebuyer tax credit extension met with similar success, and the outlook is good for California.

To learn more about the California homebuyer tax credit or to find out if you qualify, visit the Franchise Tax Board's website.

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