On March 25, 2010 Governor Schwarzenegger signed Assembly Bill 183 providing $200 million in new tax credits to California homebuyers. The total will be split evenly between first-time homebuyers of existing homes and buyers of newly constructed, previously unoccupied homes. Qualified taxpayers will receive a credit for 5% of the purchase price of the home, up to a maximum $10,000 credit. The credit is spread in equal amounts over three years, starting with taxes for 2010.

Are You Eligible?

• First-time buyers are defined as those who have not owned a home in the past three years.
• Buyers must be at least 18 years old and be unrelated to the seller.
• Buyers must live in the home they buy for at least 2 years immediately following the purchase, or repay any credit taken.

When Does It Take Effect?

This credit takes effect on May 1, 2010 the day after the Federal tax credit for homebuyers expires. Eligible taxpayers must close escrow for the purchase of a qualified principal residence on or after May 1, 2010, and on or before Dec. 31, 2010. The credit is also allowed for the purchase of a qualified principal residence on and after Dec. 31, 2010 and before Aug. 1, 2011, if an enforceable contract is executed on or before Dec. 31, 2010. It allows a taxpayer to qualify for the credit, by contracting to purchase a property before the home has been built. But don’t wait until the end of the year.

Act Fast.

Last year California allocated $100 million in tax credits for buyers of newly constructed homes. Applications started coming in to the state in early March and around the end of June no more applications were being accepted, because the $100 million had all been claimed.

The Fine Print.

This is a credit against taxes owed. So if you owe less than the amount of the credit (for example less than $3,333 in each of the three years) your credit will be no more than the amount of the taxes you owe.