The 2010 California New Home / First-Time Tax Credits are now available on a first come, first served basis. If you are unsure of how to apply, if you qualify to apply or what the tax credit could mean to you, I have prepared the following summary and provided the necessary links for your review.

Here is a summary of the 2010 California Tax Credit:

1. The purchase of a qualified principal residence on or after May 1, 2010 and on or before December 31, 2010 and close escrow before August 1, 2011, pursuant to a contract executed on or before December 31, 2010, on a first come, first served basis or until the allocation of $200,000,000 is exhausted in accordance with terms of this legislation. (It is likely that the allocation of tax credit will be fully claimed prior to the time limits described above!)

2. Up to $10,000 of California Tax Credit, per qualified purchaser, to be allocated over three years, beginning with the year the escrow closes on the new home.

3. The total allocation of $200,000,000 in tax credits is divided between first time home buyers and purchasers of new homes, with $100,000,000 being allocated to each type of purchaser.

4. The reservation of a tax credit may be achieved by submitting a jointly signed certification to the Franchise Tax Board (FTB) at the time of execution of the contract to purchase. The FTB has created the necessary forms (Form 3549-A is to be used for New Home and First-Time Buyer tax credit applications after the close of escrow. Form 3549-RR is to be used by buyers of a new home, requesting a reservation of a tax credit.) The procedures for claiming the reservation of the tax credit and the allocation of a tax credit are further explained on the FTB web site.

5. A “qualified principal residence” is an attached or detached home that will be used as the principal residence of the purchaser, and has either never been occupied or is purchased by a first time home buyer.

6. A “first time home buyer” is and individual who has no present ownership interest in a principal residence now or over the three previous year period, ending on the date of purchase.

7. The tax credit is non-refundable, meaning it is a use it or lose it credit. You would need to have $3,333 of state tax liability each of the next three years to utilize the maximum amount of the credit available.

8. The amount of the tax credit is the lesser of 5% of the purchase price or $10,000, which means any home over $200,000 in price will be limited to the $10,000 credit.

9. You must be 18 years of age and not claimed as a dependent on someone else’s tax return to be eligible to claim this tax credit.

10. For the answers to more specific questions, try the FAQ set up by the FTB for this Tax Credit.

Credit: http://blog.brookfieldsd.com/the-2010-california-tax-credit-is-up-and-running/