Having a higher mortgage can be a huge tax benefit and one of the major benefits associated with real estate ownership. When you are purchasing a new home, it is important to understand the tax ramifications associated with it. The California property tax is approximately 1.25% of the sale price of your new property. This may vary according to the local bonded indebtedness in your area. You will also have a one-time supplemental property tax based on when escrow closed and the sale amount. This amount may be calculated on the Los Angeles County Tax Assessor's site.
Each area may have additional real estate related taxes, such as a Mello-Roos tax often found in Orange County. Consult with the website of the county of interest to find out more about additional taxes.
$10,000 California Homebuyer Tax Credit
As of March 25, 2010, the buyer who purchases a home (cannot belong to a relative) on and after May 1, 2010, and on or before Dec. 31, 2010, will be able to take the allowed tax credit. The credit is equal to 5 percent of the purchase price or $10,000, in equal installments over three consecutive years. The credit is applied against your current state tax owed. 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). Buyers, THIS IS YOUR TIME! The funds are available on a first come, first served basis. Please see the Franchise Tax Board's link to the tax credit.
$8000 Tax Credit
First time buyers: For California homebuyers, tax time is now tax relief time too. Thanks to recent 2009 laws, a California homebuyer may qualify for tax credits for buying his or her piece of the American dream. The two tax credits are a first-time homebuyer credit up to $8,000 or $6500 under federal law. NOTE: The 1st time buyer $8000 tax credit is currently scheduled to end April 30, 2010--if you have an accepted contract on that date your period is extended another 60 days. The income limits were extended on November 6, 2009, to $125,000 for single filers, and $225,000 for joint filers.
$6500 Tax Credit
Existing homeowners are eligible for this credit if they have lived in their principal residence for the prior 5 years.
If the home remains your primary residence for the next 36 months, the owners does not have to repay the tax credit amount.
For complete information on how these credits apply to your particular tax return, you should consult a tax advisor.
For a more detailed chart on homebuyer's federal and California tax credits (prepared by Calif. Association of Realtors), contact me with your e-mail info and I willl be happy to send you a copy of the chart, current as of April 13, 2009.
Property Tax Reduction
Another tax benefit is reduction in your property taxes if your principal residence property's tax base value has fallen from the current assessed value. For instance, if you believe the current market value has dropped below what you paid for the property, you should investigate your eligibility for the tax reduction. Just go to the Los Angeles County Tax Assessor's site, or to your local county's site, to find the application and requirements for this reduction.
If you would like help for finding the comparable properties for this form--you will be required to provide comparables with your application--I will be happy to help you. Just call or e-mail me.
Mills Tax Act
For qualified properties in historic districts, the Mills Tax Act may apply. The City of Long Beach has participated in this program, the interested party should contact the city for the current status. For properties which have already obtained this benefit, the benefit would pass to the new owner until the expiration of the current applciation (a period of years).
Home Improvement Tax Credits
Find more information on tax credits for numerous types of home improvements and changes.
Be sure to contact us if you have additional questions, and enjoy the real estate tax resources below.
