CA tax break starts soon for new home buyers

February 27, 2009 11:58:48 PM PST
Finally, some much needed good news for homebuyers in California. New homebuyers will get a $10,000 state tax break starting this weekend. It is part of the deal that was negotiated to get the state budget passed.

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The California Industry Building Association is forecasting for this year the fewest number of new homes built in the state ever. That is after last year's record low, but a new state tax incentive could turn things around.

"They're all over the place. New homes just sitting empty, and it's a shame," says Vanessa Hunter, a new home buyer.

After being indecisive for months, 24-year-old Hunter says she's ready to take the plunge because of the state's new $10,000 tax credit for homebuyers.

"If the government is willing to put that money towards getting new houses, it makes you feel a little more comfortable," says Hunter.

In a last minute deal to get Republican Senator Roy Ashburn to support the budget compromise last week, he asked for and got the credit. The properties in California must close escrow between March 1, 2009 and March 1, 2010. They must be brand new, single family homes that have never been occupied, and it must be the buyer's principal residence.

Californians can claim $3,333 a year for three years beginning with the 2009 tax year. It aims to help new homes compete with the glut of foreclosures.

"Back in 1975, the U.S. Congress enacted a tax credit identical to this one and it worked. It stimulated sales, doubled sales within a year," says Tim Coyle, from the California Building Industry Association.

"We've been allocated $100 million to give out this credit. And, it's on a first come, first serve basis. Once, it's been allocated, it's gone," says Brenda Voet, from the California Franchise Tax Board.

Even though the state's finances are tight, Governor Schwarzenegger says leaders had to do something to help ground zero of the housing crisis.

"I think that investing in California and making investments that brings the economy back and creates jobs always is very wise," said Governor Arnold Schwarzenegger (R) of California.

Luckily for Vanessa, she's also a first time homebuyer, making her eligible for another $8,000 in federal tax credits, making her total break $18,000.

"If we all try doing what we can to put our confidence and our money back in, then that will really go a long way towards making things better," says Vanessa.

The Franchise Tax Board is still designing the certificate for the state's tax credit. Click here for tax credit info

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