April 1, 2010
Summary of AB 183
AB 183 became law on March 25, 2010. It was signed by the governor as
emergency legislation, thus, going into effect immediately. The law
$200 million for home buyer tax credits, allocating $100 million for
first-time homebuyers of existing homes and $100 million for purchasers
new,or previously unoccupied, homes. To qualify for the tax credit, a
must purchase a qualified personal residence on or after May 1, 2010
andon or before Dec. 31, 2010, or purchase one on or after Dec. 31, 2010
before Aug. 1, 2011 provided that an enforceable contract was executed
before Dec. 31, 2010.
Here is a partial summary of the law:
1) AB 183 provides a credit of not to exceed the lesser of
$10,000 or 5% (see also Item 2 below) of the purchase price of a
principal residence," defined as a single-family residence purchased by a
first-time home buyer or one that has not been previously occupied:
a) A first-time home buyer is a taxpayer who has had no ownership
interest in a principal residence in the preceding three-year
b) A new home is a home which has not been previously occupied.
The credit must be applied by the taxpayer in equal amounts over
successive taxable years.
2) AB 183 limits the amount of the aggregate credit for first-time
homebuyers to $100 million and for new homes to $100 million, for a
$200 million in allocated credits. To account for the incomplete
utilization of the credit by many taxpayers, the Franchise Tax Board
to reduce the allocation amount for new homes by 70% of the value of the
credit and reduce the allocation amount for first-time homebuyers by 57%
value of the credit.
3) AB 183 provides a credit for purchases of qualified homes on or
May 1, 2010 and on or before Dec. 31, 2010. It also provides a credit
purchases of qualified homes on or after Dec. 31, 2010 and on or before
31, 2011, pursuant to an enforceable contract executed prior to
Dec. 31, 2010.
4) AB 183 allows a taxpayer to reserve a credit prior to the close of
escrow for the purchase of a new home if the taxpayer and seller jointly
and submit to the FTB a certification stating that they entered into an
enforceable purchase contract on or after May 1, 2010 and
on or before December 31, 2010.
5) AB 183 establishes that:
a) the credit is available for only one qualified principal
b) the home must be occupied for at least two years immediately
its purchase or the credit amount used will be "recaptured" in
tax years; and,
c) the credit is available on a first-come, first-served basis.
6) AB 183 requires taxpayers to submit to the FTB a properly
settlement statement and a certification from the seller that the
not been previously occupied or a certification from the taxpayer
or she is a first-time homebuyer.
7) AB 183 restricts the credit to taxpayers who did not receive a
credit under the previous home purchase credit pursuant to SB 15 X2
(Ashburn), Chapter 11, Statutes of 2009-10, Second Extraordinary
Session. It also excludes persons under the age of 18, individuals
as dependents by another taxpayer and taxpayers who are related to
8) AB 183 mandates the FTB to establish a wait list of taxpayers
based on the date that a certification or reservation was received
tax credit for new homes has been exhausted. The FTB is to notify
these taxpayers as to the availability of any remaining credit
December 31, 2011.
9) AB 183 differs from the federal homebuyer tax credit in that it
provides a setoff to state income taxes owed with some limitations.
If the homebuyer owes no taxes, the homebuyer does not receive a
the amount of the credit.
For more information about the Tax Credit, click here.