New Homebuyer Tax Credit Update

These tax credits are available for taxpayers who purchase 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. The purchase date is defined as the date escrow closes.

Taxpayers may apply for the tax credits if they have entered into a contract before May 1, 2010, as long as escrow closes on or after May 1, 2010.

These tax 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. The tax credits cannot reduce regular tax below tentative minimum tax (TMT). The tax credits are nonrefundable and unused credits cannot be carried over.

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. However, since many taxpayers will not be able to utilize the entire tax credit, the legislation specifies that the $100 million cap for the New Home Credit will be reduced by 70 percent of the tax credit allocated to each buyer and the $100 million cap for the First-Time Buyer Credit will be reduced by 57 percent of the tax credit allocated to each buyer.

For example, if a taxpayer is allocated $10,000 for the New Home Credit, the $100 million cap for the New Home Credit will only be reduced by $7,000. If a taxpayer is allocated $10,000 for the First-Time Buyer Credit, the $100 million cap for the First-Time Buyer Credit will only be reduced by $5,700. The 70 and 57 percent reductions do not impact the amount that can be claimed by the taxpayer.

The State will allocate the tax credits on a first-come, first-served basis.

Only one tax credit is allowed per taxpayer. If a taxpayer qualifies for both tax credits, the law specifies that we will allocate the amount under the New Home Credit.

Taxpayers will not be eligible for either tax credit if any of the following apply:

The taxpayer was allowed a 2009 New Home Credit.
The taxpayer is under 18 years old. (A taxpayer who is married as of the date of purchase will be considered to be 18 if the spouse/registered domestic partner (RDP) of the taxpayer is 18 or older on the date of purchase.)
The taxpayer or the taxpayer’s spouse/RDP is related to the seller.
The taxpayer qualifies as a dependent of any other taxpayer for the tax year of the purchase.

March Home Sale Results in Santa Cruz

Only 4 homes closed escrow in March over the $1,000,000 mark, but 13 went pending, or are under contract, a great gain. 102 properties under the $1,000,000 market are under contract in March, another solid gain.

The statistics are skewed in the media because so many sales are short sales which can be 60-180 days under contract, but the buyers are making offers quickly and the best properties are in escrow in under 20 days in the $400,000-$650,000 market. That market is moving quickly.

If you are in distress, don't wait too long to market your property. Interest rates are starting to climb, and that inflationary cycle that has been looming is still out there. While distressed families often go into paralysis, you must keep your wits about you and reach out to your mortgage lender and your creditors. Make a realistic estimate of your chances for fiscal recovery and decide whether to hold 'em or fold 'em. Often the relief from the pressure gives you renewed energy for a do over.

Our society is struggling with a huge demographic shift right now. Countless workers are reviewing their opportunities, rethinking their options, and determining what the next chapter is going to look like. It won't look like the past, that ship has sailed. So much has changed, gone is the pay phone, film, video rental outlets, music stores, hotel keys, (remember those big plastic tags, "Drop in any mailbox, postage guaranteed"), letters, and countless other changes to our social fabric. Also, America is finally the salad bowl it always claimed to be with diversity in all sectors of the work force. The Baby Boomers are moving en mass to the golden years, leaving behind a generation much smaller and then comes the swell of the Boomlett kids, or Millennials.

This is a time to think creatively, don't be constrained by the past, look forward to what makes you feel valuable, what makes you feel like a contributor. Unshackle yourself from pre-conception, and look at the world as it is now. Find new ways, forge new trails. If you have to let your home go, so be it. It's sticks and mortar. The real value is the memories which are yours to keep. Go out and forge new ones. You are you, regardless of conditions.