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The California state tax credit was introduced in February, as a part of the long-awaited budget package. One hundred million dollars has been set aside to stimulate the economy by offering consumers an incentive to get off the fence and buy a new home. The first thing that came to mind was: can cash-strapped California afford this kind of largess?
It turns out that new home sales are actually a net benefit to the economy. Even with as much as $10,000 going back to the consumer in tax credits, California still sees $6,000 in state revenues. So this particular incentive isn’t going to give the state a hefty headache the morning after all of the funds are distributed. A word of advice, though: in a state as large as ours, $100 million goes pretty fast. The tax credit went into effect on March 1, and remains in effect till March 1, 2010…. OR until the money runs out. So do the math: the money will cover the first 10,000 homes (based on 5% of the value of a new home) —so if you’re purchasing anything over $200,000, you qualify for the full $10,000 credit.
I had the opportunity to spend some time last week with Jim Ghielmetti, CEO of Signature Properties, and a member of the California Transportation Commission. In the first of a five part series, Jim offers a view of how this credit is going to work to stimulate the economy, get investors out of the new homebuying market, and put the construction trades back to work.
For more detailed reading, the California State Franchise Tax Board has a good explanation of the plan. For more information, take a look at www.ftb.ca.gov.
March 17th, 2009 at 10:52 am
Colleen, congratulations on the launch of THE REAL STORY!
Here’s a thought or two on the state… and federal tax credits that I wanted to further point out to consumers…
While the California State tax credit may only be around through March 2010, it might be wise to clearly point out that this tax credit is only for “NEW” homes.
In the event that a “first-time hombuyer” is interested in what turns out to be “the home of their dreams” and is an “existing” property that is not “new”, the fed’s stimulus package provides that the federal government will also provide a dollar-for-dollar, $8,000 tax credit for any “first-time homebuyers” who purchase and live in a home (new or existing) from the start of the year until the end of November 2009. Note: that is the end of November 2009!
Also, important to point out that this tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000, and buyers will have to repay the credit if they sell their homes within three years.
We’ve recently received many inquiries about these tax credits for first-time homebuyers, as well as how to secure lending that tends to be more lenient for responsible borrowers, much to that of government insured loans sponsored by Federal Housing Adminestration (FHA). The timing of the tax credits, lower home prices and lower mortgage rates provide great opportunities for younger people still new in their careers and those with slightly lower incomes to purchase property within the Bay Area communities.
Wishing you great success!
George Moody
Mortgage Banking Advisor
RPM Mortgage, Inc.
Alamo, CA
gmoody@rpm-mtg.com
DRE License #01842459