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.
Bookmark this page and forward it to a friend or share on your social networks.
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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!
{ 110 comments… read them below or add one }
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Calebmei,
A great example of when not to take advantage of it. $4000 to extend just 2 weeks does not make sense to me.
1. If you can honestly say by looking at your taxes that you will not be able to benefit from the entire amount, then I wouldn’t shell out this $4000.
2. Again if you don’t get the full $10000, you really have to take a close look at releasing $4000 now and waiting 3 years for the possibility of a return + some.
3. yes it’s legal. but I think we both agree it’s not worth it for those stakes.
What about putting this extra $4000 into an interest bearing account for 3 years? Just 1 idea.
I was a first time home buyer and purchased a brand new condo from a builder on August 14, 2009. The fund of California tax credit was exhausted at that time. Can I use that to apply for this new tax credit? Thanks.
Hi Calebmei,
Could you tell us more about the $4000 fee? Who charges that fee, the seller, lender or the Escrow?
I am in the similar situation, and trying to delay the close date from 4/26 to 5/3. It seems to me the seller and Escrow are okay, but I haven’t got the answer from my lender.
Thanks.
Xiangrui
Hi Calebme,
Could you tell us more about the $4000 fee? Who charges that fee, the seller, lender or the Escrow?
I am in the similar situation, and trying to delay the close date from 4/26 to 5/3. It seems to me the seller and Escrow are okay, but I haven’t got the answer from my lender.
Thanks.
Xiangrui
Hi Alan,
Unfortunately not. Credit is for purchases after May 1st
Hi Jonas,
I am planning to extend the Escrow closing date from 4/26 to 5/3. The lender will charge $1000 for extension of rate lock date. Since we will move one month later, we also need to pay one more month rent, which is $1300. Do you think it is worthy to spend $2300 to get the possible $10000 credit? Is there any risk that FTB may deny our application? We never buy a home, and the current home price we are buying is $430k.
It says “The tax credits cannot reduce regular tax below tentative minimum tax (TMT)”. I checked the web, but still don’t understand how to estimate my TMT. This year we paid about $4000 state tax. With the similar income but the deduction of home loan, can we get the maximum $3333 credit? If not, how much could we get?
Thanks.
Xiangrui
As the rule states, the residence must be your primary residence for 2 years. My question is what happens if I receive the tax credit and a year later I have to move and it becomes a rental property? Would I have to refund the credit I received for the first year? Thanks
Hi Jonas,
If we are eligible for the state tax, how can we apply for it? Is there any form we need to fill up? We understand that there is a form for construction loans (Form 3285-A) but since they just extended it to include First Time Home buyers – do we use the same form and is the Escrow company responsible for filing the form for us after closing – so long as we close beginning of May?
Also, are you familiar with the Federal Tax Credit? If we already filed four 2009 return can we amend the return to include a 2010 closing or do we need to wait until next year when we file out 2010 return to claim the $8K tax credit?
Thank You,
Deniz
Deniz,
The forms for the 2010 credit will not be available until May 1, 2010. Any forms that are online or I’ve provided are simply for a reference. They will post these forms shortly and I will certainly have them here on my site with a tutorial on how to fill them out.
For Federal, you can amend the 2009 returns to get the credit in 2010, absolutely. Talk to your tax pro.
Jonas
Ross,
Straight from one of the references for the previous credit and I believe this will still apply for the new credit.
“Any credit that reduced tax on a tax return must be
repaid if the buyer does not occupy the home for at least
two years immediately following the purchase date.”
Hope that helps answer your question.
Jonas
Hi Jonas,
I have a question regarding the definition of “first time home buyer”. I understand the 3 year time lapse without owning a home. But are they referring to contract date or recorded date? Let me give an example:
I sold my previous house with a recorded date of 4/18/07. Now I just purchase a house with a contract signing date of 4/6/10 and a close of escrow date of 5/3/10. Can I get both the $8k federal rebate and $10k state tax credit? If yes, do I have to wait till next year’s tax return to file and get the rebate? Thanks.
I feel its unfair to leave out the people closing in April. My wife and I are a first time buyers. We will close April 16th and under Assembly Bill 183 we would be to early to qualify for 10K. We feel this is unfair to leave a gap. With the new Obama regulations lenders are taking twice as long to finish all the paper work. What can be done to have a amendment to the the bill done to allow people how closed in April?
Hi Michael,
Recorded date – you should be good to go for both and you can amend your 2009 tax returns to take advantage of the credit – I believe – when I know more, you’ll know more.
Hi James,
Well they just signed the bill on March 24th. It takes a bit to make these things policy. Plus, their intentions were to have an extension to the Federal credit which appears you are eligible for. There will be some that get to take advantage of both credits with shear luck or some strategy. I’m sorry you feel its unfair. If it makes you feel better, I bought on the HIGH in 2004 with no Federal or State credits and now my home is $250,000 underwater.
Have a good night.
Jonas
Hi Jonas
My realtor told me that the CA 10K credit can only apply to single family home property. Not for Condo, townhouse and other types. Can you kindly confirm this?
Thanks
Muthu
Hi Muthu,
Kindly tell your Realtor to read the guidelines very carefully. I don’t know where they are getting their information, but here’s two different excerpts taken straight from the Franchise Tax Board in charge of the credit.
1. New Home Credit: A qualified principal residence, for purposes of the New Home Credit, must:
* Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home.
2. First-Time Buyer Credit: A qualified principal residence, for purposes of the First-Time Buyer Credit, must:
* Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home.
Here’s the link to the FTB to show you.
Pass it on to your Realtor please.
Hope that helps,
Jonas
P.S. Condo is the same as townhome in this case by the way.
Hello Jonas:
We are closing on a short sale in May. Our purchase contract indicated that the seller/lender will pay for home warranty. The bank agreed to the contract without any modifications to the purchase contract. However, our title company is saying that the bank did not specify that they are going to cover the home warranty in the approval letter and hence they are not going to pay for this. Can they do this? If they agreed to the purchase contract, should they be not covering the home warranty too?
Thanks for all your advice.
hello my closing date is 4/28,first time buyer this is a short sale so i’m sure very complicated to change date,any chance i can still qualify for ca credit and i do owe the state 2700.00,should i talk to my leader about trying to extend?
Hi Jonas,
I’m wondering if you can tell me if I qualify as a first time home buyer under the new rules for the new California Tax Credit(10k)?
These are the facts:
* I’m currently scheduled to close escrow around May 3, 2010.
* The house I’m purchasing was previously lived in for 20 years.
* This is the first house I have ever attempted to purchase.
* I currently live in my fathers house with him and my sister.
* Around six years ago my fathers income did not qualify to refinance his house, since he is retired, so he put my sister and I on title to his house so the house would qualify to be refinanced.
* My sister has claimed all tax deductions associated with the house and mortgage in her yearly tax returns, since we were put on the deed. I have never claimed any tax deductions associated with any aspect of the house.
* We pay our father some rent, money for the yearly taxes, house insurance and some utilities.
Does being on deed (title) to my fathers house disqualify me from receiving the new California tax credit as a first time buyer since on paper it appears I own 1/3 of the house?
Thank you!
Mark
Mark,
This is a unique scenario that does require some research. Before I dive in, have you found anything since you posted on Saturday? I will call the State to see if they can answer this one and I’ll post again later.
Jonas
Jamie,
You should talk to your tax person first. Then talk to your lender, seller, agent to make sure the change won’t affect rate, closing costs, etc. It takes a lot to change a close of escrow especially if it’s already set by every party involved.
good luck to you.
Jonas
hi,
these may be dumb-sounding questions, but here goes. i always get a refund on my state taxes. not much. enough to fill the gas tank a couple of times. so, i don’t owe the state taxes. i’m about to close escrow on my first house. my questions are will i get a state tax credit if i don’t owe the state any taxes? or will the tax credit be based on how much state tax i paid in 2009? do i look at the ’state income tax’ section on my w-2 to see exactly how much money is in question? any help is truly appreciated. thank you!
Mark,
The credit is based on how much state tax is owed. So if you owe $3000 and you overpaid by a few gas tanks, then you withheld enough during the year through your pay checks. The credit, as far as I understand, will still apply to that amount that was withheld which again was properly done, so you would receive an additional refund for the taxes you withheld. So, say you got back $500, that means $2500 was withheld and paid to the state. The state would refund you that $2500. Yes, look at your W2, look at your returns and see how much is returned to you. Then talk to your tax professional once you have captured the tax credit, as it is first come, first serve. You want to make sure you take advantage of it right away.
Hope this helps.
Jonas
Hi Jonas,
I have been doing some research on the tax credit and haven’t seen any mention of whether or not there is a exclusion for making a certain amount of money. For example if I made $75,000 this or last year will I qualify for the credit if all other conditions are met?
Thank you,
Suzanna
Suzanna,
There isn’t an income requirement. the tax credit is first come first serve to any taxpayer that fulfills their criteria.
Jonas
HI guys,
So the forms has been released at can be found at
http://www.ftb.ca.gov/individuals/new_home_credit.shtml
The form needs to be filled by the seller and the buyer and the seller needs to fill parts 2, 3 and 4 of the form. Part 4 needs to be filled and signed by the seller to certify that this is a first time home buy. I am buying a used home so part 4 is not relevant for me. Can some confirm once that in my case the seller does not have to sign the form. The only information I need is the sellers SSN and address which his agent has and can give me.
This will be faster for me. Can an expert confirm that I do not need to get the seller to sign the form.
Hi Jonas,
A couple of questions:
1) It seems on 3549-A, the seller’s name, address and SSN/ITIN (part III) is required even for first-time homebuyers? I can understand that in case of new homebuyers, seller needs to certify something, but why is seller info needed for first-time homebuyers. I do not know where to obtain seller’s SSN? Escrow? Or Seller’s agent? Will they provide me with that info?
2) Is the purchase price the total amount paid by the buyer through escrow? Or is it only the purchase price of the property excluding other settlement charges (escrow fees, HOA dues for first month etc) paid through escrow at time of closing?
Thanks in advance!
Varun
Hi Jonas
Thanks for the comment to Mark on April 28. The example is very helpful. But to clarify my understanding,
The amount of $3333 tax refund is for the amount of Tax Witheld (on pay check monthly) or the amount owed to state tax (on top of the monthly witheld) during tax filing?
In this example below, can you kindly advice if my understanding is correct?
1) 2010 tax witheld = $4000, owned state tax $0 when filing return, will received maximum refund $3333
2) 2010 tax witheld = $4000, owned state tax $400 when filing return, will received $3333 – $400
3) 2010 tax witheld = $3000, owned state tax $100 when filing return, will received $3000 – $100
4) 2010 tax witheld = $3000, state tax refund $100 when filing return, will received $3000 + $100
Thank You,
Samy
Samy,
Those look like good examples. This is how I’ve come to understand how it works. I’m still waiting for a CPA to verify. Hopefully now that tax time is slowing down I can seek the advice of a few pros.
Jonas
AM,
For a New Home Credit the seller needs to fill in II, III and IV. For First Time Home Credit all areas but IV.
If you scroll down in Form 3549-A to page 3, in the middle you’ll see this:
“For the First-Time Buyer Credit, the buyer
completes all parts, except Part IV”
and
“Part IV is not required
for the First-Time Buyer Credit.”
Hope that helps.
Jonas
The seller will not disclose his social security on Part III of the form. Will this cause issues with my application?
Does the “total purchase price” imply the total amount transacted under the escrow (including misc escrow fees etc) or is it only the purchase price element?
Varun,
Only the purchase price is considered, not the settlement costs.
Jonas
Leo,
The seller needs to disclose that, and most likely already has on the escrow instructions to your transaction. Have your escrow agent help you with this.
Good luck.
Jonas
Getting ready to complete 3549-A as a buyer of new home. Couple of questions. 1) I’m married, spouse is not on loan or title. I’m the only person on loan and title. On the 3549-A form do I complete just my name under “Buyer 1″ and I gues list 100% ownership? I’m assuming no negative effect once filing as married jointly, correct? Since spouse is not on loan, contract or title, I guess spouse’s information under block buyer 1 is not needed.
2) To clarify the credit. Provided one qualifies up to $3333. If for example, $1,800 was withheld on W-2 for state taxes . Tax liability is $2000, normally you would pay the state $200, however, would the credit give me back the amount withheld of $1,800, minus the $200 ($1,600 state tax refund)? If that’s the case I guess increasing state taxes withholding to be in line with state tax liability is best to maximize the credit correct? So, in reality the credit is to give you back your state tax liability, whether you paid too much or you owed.
3) Last question. I guess if 2009 taxes are done they cannot be ammended on the State portion of it like the Federal can be for the $8,000 credit? I guess can Californis State taxes be ammended? Thanks!
Clarification on question 3. Can a 2009 California State Tax Return be ammended for this 2010 first time buyer tax credit? Thanks!
Another thought on question 2. As as think this more…If this is a “credit” to tax liability, then in my example shouldn’t the refund bee $1,800? In the same example, shoudn’t the amount owed ($200) be deducted from the $3,333 credit, not what was paid in state taxes? It doesn’t make sense that this amount would be deducted from what you have already paid in state taxes. In other words, if your state tax bill is $2,000 but you paid $2,200, you overpaid and will get $2,200 back (up to $3,333). But, if you underpaid $1,800 and owe $200, you should get back what you paid $1,800 and the $3,333 should off set the difference owed to the state or $200 in this case. Whether you overpaid or underpaid, the credit should off set your tax bill and either way give back what you’ve paid. Does this make sense? Thanks!
What happened to the question I posted earlier? Thank you!
Hi Jonas – Great info! In regard to the sellers ssn – I’m having a heck of a time getting the ssn and I’m worried about sitting on this and not getting the app in. Could I write “owner’s refused to disclose ssn”? I don’t want the app to get rejected…but if I wait too long, I’ll miss the opportunity anyway.
Thanks –
Laurén
Lauren,
Doesn’t escrow have this information? They should. As far as what you should do, call the FTB- Franchise Tax Board and ask away.
Please post your results on here so it will help others like you. That would be fantastic.
Jonas
Jonas,
If a first time homebuyer moves into to California from out of state, they would be limited that first year to whatever they earned in 2010 in California, correct? Their credit for the remaining 2 years would be based on whatever CA income tax they owed during those years? Thank you!
Jonas,
Sorry – I have another question. If an out-of-state first-time homebuyer buys a home in CA within the eligible timeframe but owes no CA state tax this year, would they be able to claim it for the following 3 years? Thank you!
Hi Sara,
These are great questions. The big mystery is when will the Franchise Tax Board look at the individuals tax history to determine eligibility. Will they look at previous to the sale, (so 2009) and then 2010 taxes or just 2010 taxes. All of the verbiage on the FTB site indicates – ‘taxpayer’. If they aren’t paying taxes in California, well it’s obvious, they won’t qualify, but if they owe state taxes and they analyze the amount of taxes owed for 2010 and your buyer paid CA state taxes,your buyer is eligible for the homeowner’s exemption and meets all the other criteria, then they should be able to claim for 2010 and the remaining 2 years.
After 3 attempts by phone to FTB, they still have fallen short on providing specific scenarios that show dollar figures on how much an individual will walk away with depending on their situation. Your questions will remain in my queue on my follow up calls so I can have a validated answer.
I closed escrow (purchased the home) on 3/5/2010. All along I’ve “assumed” I would enter into the buyer credit process when I do my 2010 taxes. It was only through a fluke that I found out on 5/13/2010 that I should have submitted a form to Franch. Tax Board within 14 days of close of escrow. I am a senior citizen and would apply for the credit as a long-time homeowner of my previously owned home. Have I missed my opportunity to apply for the state credit? Also, would I still use the form 3549-A??? There is only a box for New Home or First-Time Buyer Credit on the form 3549A.
I’m further confused whether I should submit any other forms either to the state or the feds at this time?
What happens if the seller, his agent, and the escrow officer refuse to disclose the seller’s social security number to me so the first time buyer credit application can be completed and submitted timely. Do I only have 14 calendar days to fax the application? Can it be submitted without the seller’s SS#? This is urgent as I closed escrow on a home May 6, 2010. I only have a few days left to meet the deadline.
Wow, I will see what I can find out. You don’t have much longer to think it over. Post your results if you get to it first, we’d all like to know, this seems like it could be a recurring problem.
Seems we too are in the same boat…the seller in our case is Fannie Mae. According to the listing agent, escrow, and our agent, nether the asset manager or even escrow (Old Republic Title) will not release / provide any additional information. Escrow is claiming non-liability even when we asked for assistance with filling out the claim form and faxing it to the state. So far all we have is the Fannie Mae with a Dallas address…
Okay, I just got off the phone with the FTB regarding Fannie Mae not providing FEIN / CA Corp #, SOS #, or ITIN… This also applies to sellers that will not give out any SSN or TIN information… Apparently it is quite common and not a problem at all; we were instructed to attach a statement indicating seller’s refusal due to privacy concerns when faxing in the claim form and the FTB will still accept claim for the credit. This is great news and takes a lot of stress off our backs.
Randy,
Huge kudos to you for taking the time to call and come back to comment. Thank you. This is great information to share with the community.
All the best,
Jonas
I have the same question as David asked above… but have not seen any response.
1) I’m married, spouse is not on loan or title. I’m the only person on loan and title. On the 3549-A form do I complete just my name under “Buyer 1″ and I gues list 100% ownership? Since spouse is not on loan, contract or title, I guess spouse’s information under block buyer 1 is not needed.
any help here?
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