California No Longer Accepting Applications for the $10,000 New Home Tax Credit
Well, it’s over. At least for now, and, with the California budget crisis, I don’t expect to see something similar in a long time. But who knows? A budget crisis like our current one is how this tax credit came into being, and there is no telling what deals will be made to resolve the current budget impasse.
On Thursday at midnight, the state of California stopped taking applications for the $10,000 tax credit that was available to homebuyers who purchased a new home between March 1, 2009 to March 1, 2010. Qualifications also limited this program to buyers who make the home their principal residence and live in the home for two years or more.
This tax credit, which was championed by the building industry, was included in the February California budget bill at the insistence of Senator Roy Ashburn (R-Bakersfield). His vote was needed to pass the stalled and long overdue state budget (Now that we have another stalled and overdue California budget, it’s deja vu all over again!).
The California Franchise Tax Board has accepted approximately, 12,000 applications for this credit. However, only 10,000 of these applicants will be granted the tax credits, which will equal $100 million in total. The tax board expects processing of these applications to continue into August.
If you are hazy on the difference between a tax credit and a tax deduction, here are some definitions:
A tax deduction, such as contributions to a Traditional IRA or 401(k), reduces your adjusted gross income. How much that deduction is worth to you depends on your marginal income tax rate (2008 Federal Tax Brackets).
If you are in the 25% tax bracket, a $1000 tax deduction means you will pay $250 less tax that year. If you are in the 10% bracket, a $1000 tax deduction means you’ll pay $100 less tax that year. If you have a simple tax situation, with little income outside of your regular job, this translates to a larger tax refund.
A tax credit is a dollar for dollar reduction in your income taxes. If you have a $1000 tax credit, you will pay $1000 less tax that year regardless of your tax bracket. A good example is the $1000 child tax credit. If your child applies and you don’t exceed the income limits, you get $1000 for each dependent child you claim on your tax return.
–Bargaineering
Graphic courtesy Wikipedia