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State offers home-buying credit

Posted: May 24, 2010 6:00 p.m.
Updated: May 25, 2010 4:55 a.m.
 
The state Franchise Tax Board is offering guidance on applications for the new home/first-time buyer state tax credit, cautioning taxpayers to work closely with their escrow companies, carefully follow instructions on the credit forms and to send in their applications timely to avoid being denied the credit.

"This tax credit will operate on a first-come, first-served basis," State Controller and board chair John Chiang said in a news release. "California families and individuals who are interested in purchasing a home should take advantage of this opportunity."

Assembly Bill 183, provides $200 million ($100 million for new homes and $100 million for first-time buyers) of tax credits to those who purchase a qualified principal residence between May 1 and Dec. 31.

The purchase date is the date escrow closes. The credit can total $10,000, by reducing one's state taxes by up to $3,333 per year for the next three years. Taxpayers may apply for the tax credit if they have entered into a sales contract before May 1, as long as escrow closes on or after May 1.

These credits are also available for taxpayers who close escrow on a new or never-occupied home after Dec. 31 and before Aug. 1, 2011, as long as they entered into an enforceable contract executed before January 1, 2011.

Credit reservations are available for taxpayers purchasing a home that may not be ready to close escrow in the near future. Those with reservations must still apply for the credit by faxing the required application and documentation within two weeks of the close of escrow. Taxpayers cannot reserve a credit for contracts entered into before May 1. Reservations are not available for first-time buyers purchasing an existing home.

Important items to keep in mind when applying for the credit:

* Applications must be faxed after escrow closes. Applications will not be honored if the 2009 form is used, or if FTB receives the application before escrow closes.

* Applications and a copy of the properly executed settlement statement must be faxed within two weeks (14 calendar days) after the close of escrow, regardless of whether a reservation request was submitted.

The tax board will accept applications by fax only at (916) 855-5577. The date and time stamp on the fax will determine the order in which credits are allocated.

Any claims received after funds are exhausted will be denied. The taxpayer must receive a Certificate of Allocation from the FTB to claim the tax credit on their California personal income-tax return.

These tax credits are limited to the lesser of 5 percent of the purchase price or $10,000. There are no income limits, but the tax credits cannot reduce regular tax below tentative minimum tax.

The tax credits are nonrefundable and unused credit cannot be carried over.
To learn more about the tax credit visit www.ftb.ca.gov.

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