PLEASE SEE RESIDE DAILY BITE 013 FOR AN UPDATE ON THIS VIDEO and how you may qualify for both tax credits. In this video, I incorrectly stated that it’s not possible to qualify for both but the California Association of Realtors just released information to show how it is possible and this is covered in episode 013.
In this video, I discuss and compare the federal home buyer tax credit with the California home buyer tax credit. Be sure to consult with your tax attorney or CPA to find out if the tax credits apply to you.
Hello everybody and welcome to the Reside Daily Bite; my name is David Doucette. Today, I want to talk about the comparisons of the California and Federal home buyer tax credits. And this came up yesterday in our Keller Williams team meeting, and our broker record Martin Mead had put together a table for us to outline the comparison chart and I wanted to share that with you today.
Let’s talk about timing first because this is actually the most important and I’m going to explain why in a second.
The Federal tax credit expires on April 30, 2010- almost a month from now. The property needs to be under contract by April 30, 2010 and closed by June 30, 2010. Meanwhile, the California tax credit begins to take place on May 1, 2010 (the day after the Federal tax credit expires). And this is very important, the timing of this and I’m going to explain that and use an example in a little bit.
If you’re a first-time home buyer, you can claim up to $8,000 from Federal tax credit and that’s a lump sum. In the California tax credit, you can claim up to $10,000 over 3 years – so it’s going to take 3 years to get that $10,000 back- and that’s 5% of the purchase price up to a maximum of $10,000. That’s for the first-time home buyer. For new construction, there is no Federal tax credit for that.
The California tax credit is also going to apply up to $10,000 for that portion over the next 3 years. And if you’re a previous homeowner, for the Federal tax credit, you can claim up to a $6,500 tax credit. In California tax credit, there is no tax credit for previous home buyer.
Now, a couple of things I want to mention (and this is very important). As first time home buyers, in Federal we have an $8,000 tax credit available to us right now that expires on April 30. On May 1, in California, we’re going to be able to claim an up to $10,000 tax credit. I was on a real estate forum last night and a mortgage broker posted an article stating that California first-time home buyers are going to be eligible for an $18,000 tax credit and that’s just not true, it’s misinformation and here’s why: it goes back to the timing. The Federal tax credit expires on April 30 while the California tax credit comes into play on May 1; so there is no overlap. There is no way for a California first-time home buyer to qualify to both Federal tax credit and the California tax credit. It’s a very important distinction to be aware of because my guess is, depending on what circle you’re running and you may hear more about somebody claiming that you can claim up to an $18,000 tax credit, is just not true.
Now, if the Federal program gets extended (which we don’t know right now if that’s going to happen or not) then, that would be a possibility but right now, absolutely not.
But I think the California tax credit is a good thing for first-time home buyers because I know there are a few out there who might feel missing out on the Federal tax credit by not acting soon enough but if they did, they’ll still be able to qualify for the California tax credit which actually may mean more money -up to$10,000. It’s just going to be dispersed over a 3-year period. And by all means, consult your CPA or your tax attorney or your financial consultant to find out the details of these programs. I just wanted to give you a broad overview and clear up that timing issue of the $18,000 which is something that is not available.
My name is David Doucette, thank you so much for joining me on the Reside Daily Bite.