Background: California's "New Home / First-Time Buyer" tax credits are available for taxpayers who purchased a qualified principal residence on or after May 1, 2010, and before January 1, 2011. Additionally, these tax credits are available for taxpayers who purchase a qualified principal residence on or after December 31, 2010, and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010. Both credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence. Taxpayers must apply the total tax credit in equal amounts over 3 successive tax years (maximum of $3,333 per year) beginning with the tax year in which the home is purchased. Note, however, the total amount of allocated tax credit for all taxpayers may not exceed $100 million for the New Home Credit and $100 million for the First-Time Buyer Credit.
New Home Credit: A qualified principal residence, for purposes of the New Home Credit, must:
Be a single family residence, either detached or attached. This can be a single family residence, a condominium, a unit in a cooperative project, a house boat, a manufactured home, or a mobile home. A home constructed by the taxpayer is not eligible since the home has not been "purchased."
Have never been occupied. Sellers must certify that the home has never been occupied in order for a taxpayer to receive an allocation of the credit.
Be eligible for the California property tax homeowner's exemption.
Be occupied by the taxpayer as their principal residence for a minimum of 2 years immediately following the purchase.
Update: As of March 24, 2011, the First-Time Buyer Credit was fully allocated. However, the California Franchise Tax Board (FTB) has issued an update on the New Home Credit. As of May 17, 2011, the FTB has numerous reservation requests and applications, but has not yet received sufficient applications to allocate the full $100 million. Claimants should continue using the 2010 forms for homes purchased pursuant to an enforceable contract in 2010, but closing in 2011. Taxpayers who applied for the New Home Credit for a purchase that closed escrow in 2010 and have not yet received a determination from the FTB, may either: get an extension to file their tax returns (to avoid penalties and interest, compute and pay any balance due as if their application will not be approved) or file now, but do not claim the credit (if their application is approved, they may then file an amended return).