Governor Signs Home Buyer Tax Credit Legislation Into LawGovernor Signs Home Buyer Tax Credit Legislation Into Law

Governor Schwarzenegger signed Assembly Bill 183, the Homebuyer Tax Credit legislation, into law today.

AB 183 will provide $200 million for home buyer tax credits, allocating $100 million for qualified first-time home buyers of existing homes and $100 million for purchasers of new, or previously unoccupied, homes. The eligible taxpayer who purchases a qualified personal residence on and after May 1, 2010, and on or before Dec. 31, 2010, or who purchases a qualified principal residence on and after Dec. 31, 2010, and before Aug. 1, 2011, pursuant to an enforceable contract executed on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. Under AB 183, purchasers will be required to live in the home for at least two years or forfeit the credit (i.e., repay it to the state).

The impact of the federal home buyer tax credit is clear. Nearly 40 percent of first-time home buyers said they would not have purchased a home if the federal tax credit for first-time home buyers was not offered, according to California Association of Realtors research conducted last year.

So as long as government subsidizes buyers, lower-priced housing will continue to fuel the real estate market.