At the end of March, Gov. Schwarzenegger signed Assembly Bill 183, the Homebuyer Tax Credit legislation, into law. What does this mean? $200 million for home buyer tax credits:
• $100 million for qualified first-time homebuyers of existing homes
• $100 million for purchasers of new, or previously unoccupied homes.
The credit is equal to the lesser of 5 percent of the purchase price or $10,000 in equal installments over 3 consecutive years. Purchasers will be required to live in the home for at least 2 years or forfeit the credit (i.e., repay it to the state).
Why would the state do this when they are hurting for money?
The state’s previous home buyer tax credit was so successful that it ran out of tax credits by the end of June 2009, eight months before it was set to expire and just as housing markets appeared to be turning a corner. Unlike last year’s legislation, AB 183 adds a tax credit for the purchase of an existing home by a first-time home buyer.
It is expected that AB 183 will significantly contribute to the effort to stimulate job growth by helping to incentivize first-time home buyers to purchase homes that have been abandoned, foreclosed upon and returned to the lender, or have been sitting on the market for extended periods of time. It is these homes that will require substantial rehabilitation by the new owners, which will in turn generate a tremendous increase in jobs and accessory purchases connected to home improvement activities.