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I am the author of this blog and also a top-producing Loan Officer and CEO of InstaMortgage Inc, the fastest-growing mortgage company in America. All the advice is based on my experience of helping thousands of homebuyers and homeowners. We are a mortgage company and will help you with all your mortgage needs. Unlike lead generation websites, we do not sell your information to multiple lenders or third-party companies.
A recently passed law established a personal income tax credit for purchasers of a qualifying principal residence. The tax credit is capped at the lesser of $10,000 or 5 percent of the purchase price for the purchase of a principal residence that has never been occupied made between March 1, 2009 and March 1, 2010.
The credit will be provided in equal amounts ($3,333 for the $10,000 credit) over the three successive taxable years beginning with the year in which the purchase is made.
Qualifying residences must never have been occupied and must be eligible after purchase, for the Homeowner’s Property Tax Exemption. The taxpayer must live in the home as their principal residence for at least two years or be subject to payback for any tax credits received.
Unlike the federal tax credit, the state has limited the total amount of credits that may be claimed to $100 million. Because of this provision buyers must make a tax credit reservation, and credits will be allocated on a first come first served basis.
To qualify for this credit, within one week (seven calendar days) after the close of escrow:
- The seller must complete Part I of Form 3528-A, Application for New Home Credit, certifying that the home has never been occupied, and provide a copy to the buyer or escrow person.
- The buyer will complete Parts II & III of Form 3528-A.
- The escrow person on behalf of the seller and buyer will fax the completed form 3528-A to FTB at 916-845-9754, and provide a copy to the buyer.
Fax is the only delivery method that will be accepted and considered for credit allocation by FTB, as the date and time stamp on the fax will determine the order in which credits are allocated.
Once qualified, the buyer will receive notification of credit allocation from the FTB, which is necessary to redeem the credit. The credit allocation letter will state the amount the buyer can claim listed by tax year. If the available credit exceeds the current year net tax, the unused credit may not be carried over to the following year.