California Home Buyers to Get $10,000 Tax Credit

California Governor Arnold Schwarzenegger, whose last term in office will soon be terminating for good (we have limits, you know), has signed into law a measure that he hopes will pump some life into the state's all but dead housing market. The new legislation, AB183, will provide a tax credit up to $10,000 to Californians who buy their first home or a newly constructed home. The tax credit goes into effect on May 1st.

Buyers who time it just right may also be able to qualify for the federal $8,000 first-time home buyer tax credit, for a total of $18,000 in write-offs. The federal tax credit is set to expire soon, though: contracts must be signed by April 30 and deals closed upon by June 30.
Says the Governor on his Web site
, " I have been up and down the state pushing this important housing bill that will get people off the fence and into homes, while creating jobs and stimulating our economy."

Now, in a state facing a budget deficit the size of the average black hole at the center of the cosmos, a piece of legislation that totals about $200 million is no small feat. Of that amount, $100 million will go for buyers of new, unoccupied homes; the other $100 million will go to first time buyers of existing homes.

One of the co-authors of the legislation, Democratic California Assembly member Anna Caballero (the other author was Republican state Senator Roy Ashburn) says on her web site, "I am very happy that my fellow legislators came together in a bipartisan manner to approve AB183, which is an economic stimulus and job creation bill."

You have to either live in this state or closely follow it to understand just how significant a statement this actually is: If you think politics in Washington is partisan, hop on a plane to Sacramento. These guys make DC look like Disneyland!

Back to the legislation: the new credit will cover home purchases made from May 1, 2010 to December 31, 2010, and will be available to home buyers on a first-come, first-served basis. According to the Governor's website, the tax credit will be applied "in equal amounts over a period of three taxable years."

Some caveats apply: the buyer cannot be a dependent and the home purchased can't belong to a relative.

This isn't the first time California has tried this approach. A $100 million tax credit was approved back in February 2009 but ran out after four months. More than 10,000 Californians claimed the credit. Schwarzenegger is trying to recapture some of the success of that program, which he credits with increasing home purchases and "jumpstarting building projects and boosting local economies."

His office says that one housing community, La Ventana Homes, actually saw a "300 percent increase in sales" when the earlier version of the tax credit went into effect.

The new tax credit, however, is hardly a cure for all that ails the California housing market, among the hardest hit in the nation. Here, like elsewhere, the biggest problem isn't people who can't afford to buy new homes, it is people who can't afford to pay the mortgage on the homes they are currently living in. AB183, of course, does nothing to help these folks.

Rather, it is viewed as a way to promote housing construction jobs in a state where the unemployment rate is much higher than the current national average.

Charles Feldman is a journalist, media consultant and co-author of the book, "No Time to Think: The Menace of Media Speed and the 24-hour News Cycle." He has written about real-estate related issues for several years.

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