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Wednesday, October 6, 2010

Time Running Out on California Home Tax Credit


The California New Home Tax Credit is available for qualified buyers who, on or after March 1, 2009, and before March 1, 2010, purchase a qualified principal residence that has never been occupied. The buyer must reside in the new home for a minimum of two years immediately following the purchase date.

The Franchise Tax Board has reached the allocated $100 million in new home credit applications; however, many of the applications the FTB received were duplicates, revised, or invalid, so the FTB plans to receive 12,000 applications in total to account for any of the aforementioned issues.

Do I Qualify?

The following are stipulations regarding California’s New Home Tax Credit:

  • The home must be a single-family residence, whether detached or attached.
  • Never have been previously occupied (i.e. new construction).
  • Be occupied by the buyer for a minimum of two years.
  • Be eligible for the property tax homeowner’s exemption (California Revenue and Taxation Code Section 218).

How Do I Claim the Credit?

  • The buyer must receive an allocation of credit from the Franchise Tax Board (see How Do I Apply for the Credit at right).
  • The buyer must claim the credit on an original timely field return (including extensions).

How Do I Apply for the Credit?

If you qualify for the New Home Tax Credit, follow the steps below to apply.

Step 1 - Seller Fills Out Form

Within one week (seven calendar days) after the close of escrow the seller must fill out Form 3528-A (Application for New Home Credit). This application will certify that the home has never been occupied.

Step 2 - Buyer Fills Out Form

They buyer receives Form 3528-A from the seller and fills out their section (Parts II & III) of the form.

Step 3 - Fax the Form

The escrow person, on behalf of the seller and buyer, will fax the completed form to the Franchise Tax Board and provide a copy to the buyer. Note: Fax is the only delivery method that will be accepted. The date and time stamp on the fax will determine the order in which credits are allocated.

After Submitting the Form

The buyer will receive notification from the Franchise Tax Board informing them of their credit allocation. If the application is received after the total credits available ($100M) have been allocated, the allocation of credit will not be issued.

Important Notes

  • Ensure only one completed application per residence with all qualified buyers listed on Form 3258-A is faxed to the FTB.
  • Do not include information on nonqualified buyers.
  • Do not fax the application to Franchise Tax Board before escrow closes.
  • Do not fax the application to Franchise Tax Board more than once.

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