California lawmakers hope a new plan to extend a $10,000 tax credit to first-time buyers and those purchasing new homes will help jumpstart the state's lagging housing market, as well as work to clear a backlog of abandoned and foreclosed homes.
That's a tall order in a state with one of the country's highest foreclosure ratings and where builders are struggling to get new developments off the ground.
Signed by Gov. Arnold Schwarzenegger this week, the new law provides $200 million for homes purchased between May 1 and Dec. 31 and between Dec. 31 and Aug. 1, 2011-- twice as much as a similar measure provided for new home purchasers in 2009. Builders blamed a sharp downturn in construction last summer on a discontinuation of the tax credit after funds were exhausted in only five months.
"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," Schwarzenegger said at a press conference with a Fresno subdivision as a backdrop.
Given the popularity of last year's program, California taxpayers should ready themselves to apply for the new funds as soon as they become available.
The funds will be allocated on a first-come-first-served basis. The credit is not a refund -- like a federal incentive program for first-time homebuyers that ends next month -- but will result in a reduction or elimination of state taxes over a three-year period. There are no income limitations and buyers must reside in the home for at least two years.
If last year's tax credit program in California is any indication of the need, the new funds are sure to be exhausted quickly. The state's Franchise Tax Board stopped accepting applications for the first $100 million tax credit program for first-time home buyers last July after it received 12,000 requests in only five months.
To qualify for the tax credit, state officials suggest that potential buyers visit the Franchise Tax Board's Web site to familiarize themselves with the program's requirements. Last year, the agency designed a Web site with program specifics, answers to frequently asked questions, and links to required forms.
The board expects to have "a significant amount of information and guidance" on its Web site about the new program by Tuesday, said Brenda Voet, an agency spokeswoman. The address isn't yet available, but to find the site she suggested that people go to www.ftb.ca.gov and type "new home credit" in the search box on the front page.
Understanding Stock Market Indexes
What does it mean when people say "the market is up 2%"?View Course »