California Gives Buyers of New Homes an Additional Tax Credit

Buyers of new homes in California will be eligible for as much as a $10,000 credit on their state tax returns under a bill that is expected to be signed by Gov. Arnold Schwarzenegger. "The measure, which has cleared both the state's General Assembly and Senate, establishes a tax credit of 5% of the purchase price, up to a maximum of $10,000, for anyone who buys a new house between March 1, 2009 and Feb. 28, 2010, or whenever funding is exhausted, whichever comes first. A total of $100 million - the equivalent of 10,000 purchases at the maximum credit - has been allocated for the credit. A first-time buyer in the Golden State who closes before Dec. 1 of this year also will qualify for the $8,000 federal tax credit enacted earlier this month by Congress as part of the most recent economic stimulus package, for a combined benefit of up to $18,000. California's homebuilders say the state credit, which will be paid out in equal increments of up to $3,333 over three years, will result in a net gain for the state coffers "because building a new home generates some $16,000 in state tax revenue." They also expect it to push reticent prospects off the fence and back into the market, and in the process, jumpstart a homebuilding industry that recently has built the fewest housing units since records started being kept in the early 1950s. Taxpayers must repay the credit if they do not live in the home as their principal residence for at least two years.