California Tax Credit
The new California Tax Credit on new homes for any taxpayer and new & existing homes for first time home buyers that begins May 1, 2010 has raised many questions that deserve a good, detailed answer.
This page will be refreshed often with new questions pertaining to the credit, steps to take to obtain the credit once it’s available, forms to use and additional professionals to contact for further information.
Please submit your questions below in the Comments section and eventually they will be added to the list. There are approximately 4 other articles that I created that are creating questions of their own – those will be posted here too.
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Forms for Reference
2010 Reservation Request for New Home
2009 Form 3528 – actual form from last year – cannot be used for new credit – only use as a reference – DO NOT SUBMIT THIS!
FTB Publication on 3528 – after credit was exhausted, FTB released this
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Top 2 Featured Questions
From FTB 2010 Guidelines:
Since many taxpayers will not be able to utilize the entire tax credit, the legislation specifies that the $100 million cap for the New Home Credit will be reduced by 70 percent of the tax credit allocated to each buyer and the $100 million cap for the First-Time Buyer Credit will be reduced by 57 percent of the tax credit allocated to each buyer. We will allocate the tax credits on a first-come, first-served basis.
Q. What do these reductions mean and how does that effect me?
A. This is being investigated and once properly researched and understood, the results with examples will be posted. Most likely a whole post dedicated to this portion of the guideline. I’m on it.
A. From Xiangrui Comment below: (check his full comment and my response for more info)
“If a first time buyer is allocated $9000 credit, the $100 million cap now will be reduced to $100 million – $9000*57%. The cap keeps reduced after each allocation until it is used by all allocation
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Q. So… Ca tax credit is very different form Federal which is refundable, correct?
It causes confusion among those who want to rushes to change closing date to May, 1… It is not WORTH IT, IF YOU DON’T OWE MONEY TO THE STATE, YOU WONT GET A REFUND!!
A. Non-refundable simply means you can not get back more than what you paid in tax. It’s used to prevent fraud and welfare. For example, you paid $2500 California state income tax and you don’t owe any tax money. With this tax credit, you will get a $2500 check back after you file your tax return instead of $3333. Basically, if you pay enough state tax, there will be no difference between refundable and non-refundable tax credit.
Here is the difference between refundable and non-refundable tax credit:
http://thefinancebuff.com/2009/02/refundable-tax-credit-and-non-refundable-tax-credit.html
-thank you to DiLara for the Question and to Zack for the answer
Frequently Asked Questions
From Betty – I’m a first time buyer. If I buy an existing home (short sale in contract now) with the closing date in May can I get both Fed $8000 and Ca $10000? Because according to the Fed policy, if in contract before 4/30/2010 and close before 6/30/2010 I can get the Fed $8000 tax credit. Can I still get CA $10000 at the same time?
A. Betty, according to Assembly Bill 183 it states “purchases made between May 1, 2010, and on or before December 31, 2010, or on or after December 31, 2010, and before August 1, 2011″. Purchases may be seen two ways, a) when you first go into contract or b) when your Deed of Trust is recorded with the county. If this credit is based off of recording date and you record after May 1st you could be eligible. The tax credit will not last, in my opinion, to the end of the year, as the last credit seized 8 months early. My opinion is in order to claim the credit you will need to provide the Final HUD-1 to your tax consultant to prove your eligibility, not the purchase contract.
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From Jeff – I’m looking at closing on a condo on May 1. Would I be able to qualify for both credits if I have a contract prior to that date? Also, is the California credit just a credit against taxes owed (I normally owe the state zero) our would I be looking at receiving the full 10K over 3 years? Thanks for your help!
A. it really appears that if you record your purchase after May 1st, 2010 you’ll be eligible for the state credit. If you were in contract prior to April 30th and close before June 30th, you’ll be eligible for the Federal credit. As far as how the credit is to be distributed, that remains to be seen. They claim up to $3333/year, but the previous tax credit wasn’t as simple as that. The credit is for 5% of the purchase price or $10,000 whichever is smaller. If you owe $0 typically, in my opinion, you will receive the maximum credit each year for 3 years as long as you stay in the home for the minimum of two years as your primary residence.
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From Marisol – We closed escrow last year in January, we did not take advantage of the California Tax Credit then, is it possible to claim it now based on our purchase of 01/09??
A. Marisol, purchases between May 1, 2010 and Dec, 31, 2010 are eligible and then Dec.31 – Aug 2011 as well. You are eligible for the Federal credit if you were a First Time Home Buyer.
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Q. Our expected escrow closing date is April 22, 2010. Are we going to be eligible for the credit if we change the closing date to May 1st, 2010? The bill says purchases made between May 1, 2010, and on or before December 31, 2010, does the date means the closing date or the signing of purchase contract date?
A. I understand it to be the closing date, the day it is recorded with the county. It certainly doesn’t hurt to attempt it, that way you could be eligible for the Federal $8000 and state $10000, that is if you’re a first time home buyer.
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Q. Do you know if the house has to be under a certain purchase price for the buyer to qualify for this tax credit?
A. Their is no minimum/maximum to the purchase price. You will receive up to 5% of the purchase price or $10,000, whichever is smaller on your credit.
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Q. When did Gov. Arnold Schwarzenegger sign Assembly Bill 183 into law?
A. March 25, 2010
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Q. My wife and I are in the process of purchasing a new home jointly with my parents (50, 50). The new home is about $450,000 and the closing date of this new home will be in September 2010. There will be 4 persons on the title: me, my wife and both of my parents. However, only my wife, my kid and I will be living in the new home as our primary residence.
With my parents who are not going to live in the new home, on the title, will this affect my being qualified for the full amount of $10,000 California 2010 new home tax credit?
A. This is one of the biggest questions on my plate as it is a much more common scenario these days. In a previous comment based on a similar scenario I mentioned the parents wouldn’t be eligible for the credit which I’m assuming is okay with you. You want to make sure that you can take advantage of the credit, I’m assuming.
This will be one of my Featured Questions/Answers once I’ve researched it. Keep an eye out.
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Q. So… Ca tax credit is very different form Federal which is refundable, correct?
It causes confusion among those who want to rushes to change closing date to May, 1… It is not WORTH IT, IF YOU DON’T OWE MONEY TO THE STATE, YOU WONT GET A REFUND!!
A. Non-refundable simply means you can not get back more than what you paid in tax. It’s used to prevent fraud and welfare. For example, you paid $2500 California state income tax and you don’t owe any tax money. With this tax credit, you will get a $2500 check back after you file your tax return instead of $3333. Basically, if you pay enough state tax, there will be no difference between refundable and non-refundable tax credit.
Here is the difference between refundable and non-refundable tax credit:
http://thefinancebuff.com/2009/02/refundable-tax-credit-and-non-refundable-tax-credit.html
Reply to this answer: yes, if you paid $2500 in state tax, you will get back $2500. And if you paid $150, you will get $150. It depends how much taxes you paid. That’s what everybody should consider before making changes to their closing date…
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Be sure to look at the Comments section below for additional Questions/Answers
Please submit your Question or Answer/Reply below.
Thank you!
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I called FTB earlier and got no response and so posted the question.
I got hold of them just now, and they confirmed that if the spouse is not on the loan or title, we dont have to include the spouse information in buyer block 1… just the buyer name.
David – i guess that answers one of your questions.
Dee,
You Rock! Thank you for taking the time to consult with the FTB. It all depends on who you get on the other end of the line when you call there. Many of them are just as in the dark as we are.
Thanks again!
Jonas
My home purchase closed in May 2010. Can I file an amended tax return for 2009 to claim the CA & Fed credits or do I have to file them with my 2010 tax return? Thanks!
my final date of closing on a new home was may 14th with me not know anything about the application for the new home i just found out this week it almost going to be a month now with the home can i still apply for the 3549-a form or is it to late because it says to fax it within 2weeks of escrow???? plz help no tax profession seems to know
Hi, Sarah:
According to the FTB website, your application will be denied if it is not received within 2 weeks after close of escrow. You can try calling FTB and see if they can help you in this case.
http://www.ftb.ca.gov/individuals/New_Home_Credit_FAQs.shtml#q21 (FAQ 21)
Regards.
Billy,
I am not a tax expert but here is what I understand. You can file an amended federal return for year 2009 (assuming the contract was signed prior to april 30th) to get your $8000. For state, you have to wait until your 2010 tax return.
Sri
Jonas,
what is your opinion on refinancing at this time? Do you think the rates are headed down based on how the economy is looking? Are there any restrictions or drawbacks in refinancing within 2 months of purchasing a home? I think closing costs is a factor but is there anything else to consider?
Thanks,
Sri
Sri,
First off, I apologize for the late reply to your questions. Refinancing has never been better – rates are at the lowest we’ve ever seen. I think the rates are hitting their low point. There is strong resistance in the Mortgage Backed Securities market to see rates lower, however, all of us have been proven wrong at one time or another.
Within 2 months of purchasing a home doing a refinance could have some drawbacks but not necessarily for you – your loan officer from the purchase transaction may need to reimburse the lender for any commissions made if you pay off your loan within 4-6 months of purchase. That may not happen, it all depends on their situation.
Closing costs are an issue if they are unable to be wrapped into the loan amount. Typically with a refinance that close to when you purchased, the lender will only allow the value of the home at purchase, meaning a new appraisal would not be able to help you. A 6-12 month period is typical before you can use new appraised value on a refinance. Say the appraisal came in higher, you could use the higher value to increase your loan amount slightly to cover the closing costs. With this being only 2 months from purchase, the majority of lenders are going to keep the same value at purchase which could cause the closing costs to be an out of pocket expense.
One more thing – under some circumstances we are able to provide a significant credit toward closing costs depending on the rate you choose. This may help to offset those costs and make refinancing a worthwhile cause. I wouldn’t know until we looked at your situation a little deeper.
Give me a ring if you’d like or email me some details – 951-506-4663 or jonas@jonasloans.com
Take care,
Jonas
I was dumb and didn’t submit my application until today, even though escrow closed on June 30th. What do you think my chances are that I will receive it? I am really kicking myself for not doing this ASAP.
Do you think this will be extended again? Maybe they’ll add another 100 million to it?
Peter,
I believe they are accepting up to 28000 applications before they cut it off. There is no way to verify, Yet, how much credit has been allocated. There are going to be many duplicate, fraudulent cases that allow real property buyers the credit. So don’t stop now, get it in. They won’t add another 100 million, but the quicker you get in the better your chances are for those that don’t get the credit, who don’t qualify or who falsified their documents.
Good luck to you.
Jonas
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