More State Funded Tax Credits on the Way

According to the Orange County Register, Gov. Arnold Schwarzenegger proposed the adoption of a new homebuyer tax credit for California taxpayers.

Unlike the previous tax credit, which was depleted eight months before the deadline, the latest proposal would apply to the purchase of existing as well as new homes.

While Congress extended the federal tax credit through next spring, the state tax credit was halted early after nearly 10,700 California homebuyers took advantage of it. The homebuilding and real estate industries have been clamoring for an extension of the state credit.

Schwarzenegger said in his final State of the State address in Sacramento this morning that his first priority for the coming year will be the state’s economy and “jobs, jobs, jobs.” He then outlined four proposals to boost the economy including:


“To stimulate other construction jobs, you will receive a proposal for homebuyer tax credits of up to $10,000 for the purchase of new or existing homes.”

In a press release issued as the governor began to speak, the executive’s press office said:

“To continue encouraging homeownership among Californians, the Governor will propose to extend and expand the $10,000 homebuyer tax credit to include the purchase of existing homes in addition to new residences for first-time homebuyers. The buyer must not be a dependent and must be purchasing a home that does not belong to a relative. Under the Governor’s proposal, the Franchise Tax Board will extend the credit to buyers who purchase homes until $200 million dollars in tax credits have been granted.”

Other details haven’t been released, such as whether there’s a deadline by which homes must be purchased.

But here are some comparisons and highlights of previous tax credits:

* The proposal is for the purchase of an existing home, as well as a newly built residence. The previous tax credit was for new homes only.
* The current prosposal is to allocate up to $200 million in tax credits. The ap on the previous tax credit was $100 million.
* The state ran out of money under the old tax credit eight months before the deadline. The Franchise Tax Board stopped accepting applications at the start of July, while the deadline to close escrow on a home was to be Feb. 28.
* Like the previous tax credit, the proposed new credit would be worth up to $10,000 to the qualifying buyers.
* Under the old plan, tax credits were offered for 5% of the purchase price up to a maximum of $10,000. Tax credits were allocated on a first-come, first-served basis.
* Under the original federal tax credit, buyers of new homes by Nov. 30 received up to $8,000 in tax credits. Congress extended that deadline until April 30 to sign a contract and until June 30 to close escrow.
* In addition, Congress expanded the program to include a $6,500 credit for existing homeowners who buy a new place after living in their current residence at least five years.
* Builders and Realtors praised the state and federal tax credits for stimulating home sales.
* Critics, however, disputed that contention, arguing that tax credits merely move demand forward by getting people who plan to by a home anyway to buy sooner.


Click here to read more from the OC Register.

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~Tina Jan~
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