The 2010 California Home Buyer Tax Credit became law on March 26 of this year. Under this legislation, passed by the California legislature and signed by Governor Arnold Schwarzenegger, someone who purchases a home can get a tax credit for a total of five percent of the sale price of the home, up to a maximum of $10,000, spread out over the next three tax years. The credit is available whether you pay cash for your home or whether you take out a home loan.

How the tax credit works

This tax credit applies directly to what you will owe in California state income taxes. That means that, if you owe $1,000 in state income taxes for 2010, you will get a check back for $2,333 after the tax credit. If you owe more in taxes beyond the $3,333, that amount will be applied to what you own.

The details

This new tax credit will only apply to homes that close escrow from May 1 and on. There is an equal amount of money set aside for both first time home buyers of homes that are being resold, as well as for buyers of homes that have never before been occupied. In total, there is $200 million available.

Get going now if you want in

It’s important, however, that you move quickly if you hope to take advantage of the California Home Buyer Tax Credit. The credit will be issued on a first-come, first-served basis. That means that, once the $100 million is gone for each category, no more home sales in that category will qualify for the credit.

In fact, some experts suggest that the credit will go very fast. There are those in the realtor community that believe that the full $200 million will most likely be completely depleted by the end of May, 2010. That gives you about a 30-day window to get in, get your home, and get your tax credit.

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