March 25 2010, California Governor Arnold Schwarzenegger signed Assembly Bill 183, the Homebuyer Tax Credit legislation, into law.
“The positive impact of the home buyer tax credit at the federal level is clear,” Goddard said. “Nearly 40 percent of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to C.A.R. research conducted last year. We expect the state tax credit for home buyers to have the same impact.”
AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes.
The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. (Any home under contract by the December 31, 2010 deadline has until August 1, 2011 to close escrow.)
The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).
In a written statement, California Association of Realtors President Steve Goddard said, "His actions today are the result of our efforts in Sacramento over the last several weeks as members and our team in the capital worked for the bill's passage before it landed on the governor's desk."
The state's previous home buyer tax credit program was so successful that it ran out of tax credits by the end of June 2009. Unlike last year’s legislation, AB 183 adds a tax credit for the purchase of an existing home by a first-time home buyer.
Experts feel that AB 183 will significantly contribute to the effort to stimulate jobs-creation within California's housing market by helping to incentivize the purchase of distressed properties such as foreclosed homes or short-sales. Often these homes are abandoned or have been sitting on the market for a while.
According to Goddard, "It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities."
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