A Complete Guide to the California Homebuyer Tax Credit – Live Webinars!

There is a lot of misinformation out there about this tax credit and I’ve gotta tell you, this is just shy of rocket science…ok, maybe not that bad, but close.

California Tax Credit Webinar with Live Q&A – See Schedule of Online Classes

We have been doing live online classes all week and I have been on the phone with the State Franchise Tax Board, I can finally say that this is the most complete and accurate resource for information about the California Tax Credit you will find.

Corrections and Clarifications

After a 45 minute phone call to the California State Franchise Tax Board, I have clarification on a couple of the points that I may not have accurately made in the live webinars this week.

The total amount of allocated tax credit for all taxpayers may not exceed $100 million for the New Home Credit and $100 million for the First-Time Buyer Credit. However, since many taxpayers will not be able to utilize the entire tax credit, the legislation specifies that the $100 million cap for the New Home Credit will be reduced by 70 percent of the tax credit allocated to each buyer and the $100 million cap for the First-Time Buyer Credit will be reduced by 57 percent of the tax credit allocated to each buyer. We will allocate the tax credits on a first-come, first-served basis.

This was not making complete sense to me at first and I was not correct in my explanation of what this means in the Live Webinars.  I now have clarification. The Tax Credit will be allocated in $10,000 increments until exhausted. Because most tax payers will not use the entire $10,000, there will be an unused portion of the tax credit that will will be unrealized until after August 1st, 2011 for “New Home” applications and after December 31st for “First Time Homebuyer” applications.

The unused portion of the $100 Million that was originally allocated, will then be distributed to applications received, in the order they were received, after the original $100 Million had been reserved.  The amount of this credit will be $7,000 to “New Home” buyers and $5,700 to “First Time Buyers” until exhausted. The recipients of these reduced credits will be notified prior to December 31st, 2011.

TMT – Tentative Minimum Tax: There is a suspect little line in the guidelines that states “The tax credits cannot reduce regular tax below tentative minimum tax (TMT)”. I asked the Franchise Tax Board in my phone conversation exactly how this works and I’ll have to tell you, I don’t have a PHD in economics and I’m certainly no forensic tax code specialist, but here’s how I understood it.

The Tentative Minimum Tax (TMT) is a “measurement” that is compared with your net tax liability (after deductions).  If your net tax liability is GREATER than the Tentative Minimum Tax, you pay the taxes due.  If the TMT is GREATER than your tax liability – You are required to pay an Alternative Minimum Tax (AMT)

I also found this excerpt in the 2009 Instructions for 540 California Tax Return on Page 12.  It appears based on this instruction that the Alternative Minimum Tax (AMT) triggers if your income exceeds these limits.

I was told by the Franchise Tax Board that there is no income limit for the Tentative Minimum Tax….so, I’m not exactly sure where this leaves us in regards to the AMT.

Any feedback you can leave below to clarify this would be greatly appreciated

Again, consult your CPA or Tax Professional for information about paying an Alternative Minimum Tax.

Resources, Links & Video

You can download the application and track the availability and allocation of the California Tax Credit on the Franchise Tax Board website

Online Presentation – Live Q&A – See Schedule of Online Classes

Slide Show for Quick Viewing