A 2010 tax credit for new home and first-time buyer purchases was just signed by the Governor.  Taxpayers who purchase a qualified principal residence on or after May 1, 2010, and before January 1, 2011, will be allowed a credit equal to the lesser of 5% of the purchase price or $10,000.

Like the 2009 New Home Credit, the taxpayer must apply the credit in equal amounts over three successive taxable years, beginning with the year in which the qualified principal residence is purchased. 

The New Home Credit: A qualified principal residence, for purposes of the New Home Credit, must:

Be a single family residence, either detached or attached.

Have never been occupied. Sellers must certify that the home has never been occupied.

Be eligible for the California property tax homeowner's exemption.

Be occupied by the taxpayer as their principal residence for a 2 year period after the purchase.

The First-Time Buyer Credit: A qualified principal residence, for this purpose, must:

Be a single family residence, either detached or attached.

Be eligible for the California property tax homeowner's exemption.

Be occupied by the taxpayer as their principal residence for a 2 year period after the purchase.

A first-time buyer is any individual who did not have an ownership interest in a principal residence during the prior 3 year period.  Some taxpayers (i.e., relatives of the seller) are ineligible to claim the credit.

Each credit has a $100 million limit, and will be awarded to taxpayers on a first-come, first-served basis.   The credits are not refundable, will not reduce AMT, and cannot be carried over to future years.

If you have any questions regarding the information in this article, or have any other issues you would like to discuss, please feel free to contact the DZH Phillips tax department at 415.781.2500 or email cpas@dzhphillips.com.