Governor signs home tax credit bill   

Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits

Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit. This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state). Buyers also must be at least 18 years old and be unrelated to the seller. First-time buyers are defined as those who have not owned a home in the past three years.

To learn more about the California Home Buyer Tax Credit, click here.

http://www.car.org/newsstand/news/govsignature/

. The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.

March

 IRS issues new guidelines on obtaining home buyer tax credits

KEEP THIS IN MIND

• The federal tax credit for home buyers was extended and expanded late last year. Qualified first-time buyers may be eligible to receive a tax credit of up to $8,000 on homes purchased before April 30, 2010. Repeat buyers may be eligible for a tax credit of up to $6,500. Visit http://www.irs.gov/newsroom/article/0,,id=187935,00.html for more information about the federal tax credit for home buyers, including eligibility requirements.

• To receive the tax credit, home buyers must comply with the IRS’s documentation requirements, including a fully executed IRS Form 5405. On the form, which is available on the IRS’s Web site, taxpayers provide information supporting their claim of eligibility, such as income and home purchase date.

• The IRS also requires home buyers to submit a copy of the closing or settlement statement that proves the transaction took place. The IRS previously said that the statement should show “all parties’ names and signatures, property address, sales price, and date of purchase.” However, since closing or settlement statements vary by state, and in some cases the form does not include both the seller’s and buyer’s signatures, the IRS has revised this requirement. As long as the closing or settlement statement conforms to prevailing local practices, the IRS will accept it.

• One stipulation for repeat buyers is they must provide documentation they lived in their former property for a consecutive five years out of the previous eight years. Accepted documentation may include property tax records, hazard insurance records, or copies of annual mortgage interest statements filed with their federal taxes.

To read the full story, please click here:

http://www.latimes.com/classified/realestate/news/la-fi-harney21-2010feb21,0,1254506.story