As per the First Time Home Buyers Act passed in 2008, the first-time homebuyers were to get federal tax credit if they met the required eligibility criteria. The deadline was extended so that more number of homeowners could take advantage of the tax credit. In most of the states, the homebuyers had to sign a deal by April 30, 2010 and had to complete the transaction by June 30, 2010 in order to claim the tax credit. However, you can take advantage of the first-time home buyer tax credit till 2011 if you stay in the state of California.

First-time homebuyer tax credit in California

The taxpayers can claim the tax credit if they purchase a qualified principal residence between 1^st May, 2010 and 1^st January, 2011. However, you can also receive the tax credit if you enter into a binding contract on or before 31^st December, 2010 and purchase the property between 31^st December, 2010 and 1^st August, 2011. The purchase date will be considered as the day the escrow closes. The taxpayers can also claim tax credit if they have signed a contract before 1^st May, 2010 but the escrow has closed on or after May 1, 2010. You are also eligible to receive New Home Credit if it is a qualified principal residence.

However, a taxpayer will be able to claim only 1 tax credit. If you qualify for both the tax credits, then as per the act, the amount will be allocated under the New Home Credit.

Qualified principal residence – Eligibility criteria

The purchased property needs to satisfy certain eligibility criteria for being a qualified principal residence. The taxpayers cannot take advantage of the New Home Credit if the property doesn’t meet the eligibility criteria. The criteria are given below.

• The property should be occupied by the taxpayer as his/her principal residence for at least 2 years from the date of purchase.

• The house needs to be single family residence; the units can be attached or detached. However, the property will not qualify if the taxpayer has constructed it.

• No one should have occupied the property before. The sellers need to satisfy that the properties have never been occupied.

• The property has to satisfy the eligibility requirements in order to qualify for the California property tax homeowner’s exemption.

Tax credit – Who cannot qualify

The taxpayers have to satisfy the eligibility criteria as per the First Time Home Buyers Act. You cannot qualify for the tax credit under the following circumstances.

• You have already taken advantage of the 2009 New Home Credit
• You’re a dependant of any other taxpayer in the tax year when you’ve purchased the property
• You or your spouse has a relation with the seller of the property

You also cannot receive the tax benefit if you’re below 18 years of age. However, even if you’re less than 18 years old, you can receive the tax benefit if your spouse or your registered domestic partner (RDP) is at least 18 years of age.