Schwarzenegger Proposes $200 Million California Home Buying Tax Credit

The housing market in California is on life support. The good doctor, Governor Schwarzenegger is proposing a $200 million home buying tax credit to get it healthy again.

Living in California is expensive. The average home price varies around the state, but is substantially higher than one would experience in most of the rest of the country. Throw in property taxes and sky high utilities and things get very pricey, very quickly. When the real estate bubble burst across the country, it did so particularly loudly in California. We now have a housing market that is flaccid at best.

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So, how do you perk up a dead housing market? You do what government always does. You entice the buyer back to the market. In this case, Governor Schwarzenegger wants to implement a $200 million tax credit. It would apply to new and existing home purchases. The ultimate goal would be to drain housing inventory from the market and spur building again. Building would put people back to work.

So, how does the program work? Well, buyers can claim the tax credit up to $10,000 on the home. How does it mesh with the federal first-time homebuyer program? Very well. It is in addition to that program, which means that some buyers will get tax credits totaling in excess of $18,000. That’s a lot of mulla my friend. Regardless, the only real limitation on the California plan is you have to live in the property you buy. Also, the credit must be claimed over three years.

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So, is this a good plan? Yes and no. On its face, the plan is a step in the correct direction. The more homes we can get off the market, the quicker the housing market will rebound. On the other hand, California is nearly dead broke as we speak. Running up another $200 million in debt is almost too much to bear. In truth, the state isn’t paying anything out, just eliminating tax revenues, but you can see what I mean.

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