California Extends $10,000 Homebuyer Tax Credit

California Gov. Arnold Schwarzenegger has signed legislation that re-establishes and extends the state's $10,000 tax credit for homebuyers, a program that proved so popular last year that it ran out of money by the end of June, eight months before it was set to expire. The measure sets a $10,000 credit, up to 5% of the purchase price, for buyers of newly built homes and a similar credit for first-time buyers who purchase existing homes. The credit will be available on "personal residences" purchased between May 1 and Dec. 31, and "principal residences" acquired between Dec. 31 and Aug. 1, 2011, as long as long as they were purchased pursuant to a contract executed on or before Dec. 31. The $200 million allocated for the program, which is offered in addition to the revised and extended federal tax credit, will be split evenly between new homebuyers and buyers of existing houses. The credit comes with two caveats, however: It must be claimed in equal installments over a three-year period, and buyers must live in the homes they buy for two years or forfeit the benefit. Despite the restrictions, both builders and Realtors hailed the measure. "The tax credit will help push prospective buyers off the fence, clear out inventory, and jump start the home building industry, which will help create jobs and reinvigorate the state's economy," said Liz Snow, president of the California Building Industry Association. Nearly 40% of first-timers said they wouldn't have purchased a home if the federal credit to buyers was not offered, according to CAR research conducted last year.