HomeSection.comHomes By Herman

Will California’s First-Time Buyer Tax Credit Money Run Out Almost Before It Begins?

April 15th, 2010 categories: Buying, The Economy

Money Flying

$100 Million Could Be All Gone By Mother’s Day


California’s first-time buyer tax credit, which is slated to begin May 1, the day after the federal tax credit goes away, may be very short-lived, according to a just-release analysis by our state trade association, the California Assn. of Realtors (CAR).

According to CAR, the entire $100 million that the state legislature allocated for first-time buyer tax credits could be entirely used up in the first 10-20 days after the credit takes effect.

That means the money could be all spoken for shortly after Mother’s Day, if CAR’s prediction is accurate.

An email I received from CAR earlier today said that its economic team had looked at projected May sales and figured that all $100 million will likely be gone in the first few weeks of May.

Will Some April Buyers Wait To Close In May

It also predicted that some transactions that otherwise would have closed in late April could be pushed back until early May so the buyers can take advantage of both the federal and state tax credits.

The federal credit requires buyers to be in contract by April 30 and close by June 30. The state credit is for either first-time buyers or new home buyers who close on or after May 1.

While CAR’s prediction could be on the money (no pun intended), it’s projection may be based on the assumption that every buyer who’s eligible for the credit will submit their paperwork promptly after escrow closes.

And that’s a big “if.”

For, the way the state tax credit is set up, the Franchise Tax Board MUST receive the completed application and supporting paperwork within 2 weeks of the close of escrow. That doesn’t mean postmarked, it means received by the FTB.

There’s no appeal allowed, either. If the FTB says it didn’t get it, then it’s pretty much “end of story, case-closed.”

Just Because You Close, Doesn’t Mean You Get The Credit

So it’s not hard to imagine a fair number of buyers closing escrow and getting caught up in moving activities only to realize after it’s too late that they missed the 2-week deadline.

Accordingly, if some of those who CAR estimates will use up the tax credit allocation quickly accidentally miss out on the deadline, then perhaps the money will last a bit longer than CAR predicts.

In any event, even though the state legislature provided for buyers to apply for the credit as long as they’re in contract by the end of the year, since they only allocated $100 million to the program, it’s a pretty sure bet that it’ll be gone well before then.

For more information on the tax credit, be sure to contact your tax adviser. Additional details are also available on the Franchise Tax Board’s web site.

RECENT POSTS

MARKET UPDATES

listings-by-mls-button news-by-email-button search-the-mls-button

This entry was posted on Thursday, April 15th, 2010 at 10:08 pm and is filed under Buying, The Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply