Home Buyers Tax Credit
Taxes

California home buyer tax credit extension dead

by Broderick Perkins

(12/04/09) California won't renew its home buyer tax credit any time soon, if at all.

The California Building Industry Association's Allison Barnett told the Sacramento (CA) Bee, plans to extend the quickly depleted funds for the $10,000 tax credit for new home buyers in the Golden State died in both houses of the state's legislature.

An Assembly bill to extend the credit failed to get the vote in the Senate and a similar Senate bill likewise failed in the state's Assembly.

"We were disappointed neither of those bills panned out this year," she told Bee writer Jim Wasserman.

"We're looking for options next year," Barnett said, according to Wasserman's story.

The news comes during hard times for California's new home building industry.

New home permits for 2009 are on track to be, by far, the lowest on record, according to the nonprofit Construction Industry Research Board (CIRB), which predicts permits for just 36,000 total units this year.

Compare that to the nearly 213,000 housing starts in 2004 and the more than 322,000 starts in 1963, according to the California Building Industry Association's (CBIA) own data.

Last year, housing starts numbered about 65,000, CBIA statistics show.

CIRB said builders pulled just 29,901 permits during the first 10 months this year, a 46 percent drop from the 55,632 permits pulled in the same period in 2008.

Thus far this year, permits for single-family units are down 30 percent, while permits for multifamily units are down 64 percent.

California's $10,000 tax credit on new home purchases only, combined with the new and improved federal $8,000 tax credit to give thousands of Californians a Mother Lode of a tax credit.

It was also a boon to home sales in high-priced California.

According to California's Franchise Tax Board, more than 10,600 household benefited from a portion of the $100 million plan to subsidize new home purchases with a tax break.

The board is no longer accepting applications.

Last week CBIA called on state legislators to reconsider the tax credit, given the home building industry's potentially positive impact on the state's economy.

And as is often said, as goes California, so goes the nation.

"The state tax credit generated much positive momentum earlier this year by way of helping to generate new-home sales, and in turn, job-generating new-home construction. California lawmakers should reexamine these benefits and work to implement a new tax credit in hopes of continuing that positive momentum and encourage a broader economic recovery in the coming year," said Liz Snow, CBIA's President and CEO.

"Bolstering the housing sector would only help to foster a broader economic recovery," she added.

California home buyers, like others nationwide, are left with a federal tax credit of up to $8,000.

The extension and expansion of the popular federal home buyers tax credit gives both new and move-up buyers a tax incentive to buy a home until at least April 30, 2010, longer for military personnel.

The new law extends the existing credit for first-time homebuyers, worth up to $8,000, through April 30, 2010.

A new credit of up to $6,500 is available to qualifying existing homeowners who buy a new primary residence (or have one built) by April 30, 2010, if they owned their existing home for five consecutive years over the last eight years.

Home buyers have to repay the federal tax credit if they live in their primary residence less than 36 months and are not members of the military.

The new rule also raises the qualifying income limits to $125,000 for single taxpayers and $225,000 for joint taxpayers, from the current $75,000 and $150,000.

The maximum allowed home purchase price is $800,000.

Both first-time home buyers and others must close escrow by June 30, 2010.

Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit.

By October 9, 2009, more than 1.2 million tax returns had claimed about $8.5 billion in the refundable federal tax credit, for both new and resale homes, according to the Treasury Inspector General for Tax Administration (TIGTA).

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