The bill the governor signed last week provides $100 million in credits for the purchase of existing homes and $100 million in credits for the purchase of new homes.
To make sure that credits are not left on the table, the bill lets the Franchise Tax Board award credits to at least 17,544 buyers of existing homes and at least 14,286 new-home buyers. If each of those buyers saved the full $10,000, the state would lose more than $300 million in tax revenues. Because they won't, the tax board estimates that the actual cost should be roughly $200 million - but it could be more or less.
To get the new credit, first-time buyers can purchase a new or existing home. A first-time buyer is defined as an individual, or an individual's spouse, who had no ownership interest in a principal residence for three years before the date of purchase.
People who are not first-time buyers can get the credit if they buy a newly built home, but not an existing one.
In both cases, the home must be a single-family residence, attached or unattached, and be used as the buyer's principal residence for at least two years.
The credit is equal to 5 percent of the purchase price or $10,000, whichever is less. It must be claimed in equal amounts over three years, beginning with the year of purchase.
Buyers of existing homes must close escrow between May 1 and Dec. 31.
Buyers of new homes can reserve a credit by entering into an enforceable contract between May 1 and Dec. 31, filing the proper paperwork with the tax board and closing escrow by Aug. 1, 2011.
Like last year, the credits will be awarded on a first-come, first-served basis. The tax board estimates that existing-home credits will run out by June 30. New-home credits will also "go quickly," says tax board spokeswoman Denise Azimi.
For existing homes, once credits are allocated, the program will end.
For new homes, once the credits have been reserved, the tax board will start a waiting list. Some people who reserve a credit will never actually buy a home. Their unused credits will be awarded to people on the waiting list. The tax board must tell everyone on the waiting list by Dec. 31, 2011, whether they will get a credit.
People who bought a home after last year's state tax credit ran out and before this one takes effect are out of luck.