$10,000 tax credit for homebuyers

Did you expect taxes to increase or decrease for 2010? If you are a homeowner and/or formerly unemployed, and the governor is successful in a new initiative, you may receive a tax credit of up to $10,000. Brace yourselves for it: Californians who own homes may indeed get a break during 2010.

Earlier this month, Governor Schwarzenegger set out a plan to give a tax break of up to $10,000 to home buyers in the grand scheme of job creation. During his January 6 State of the State Address, Schwarzenegger outlined various ways in which he’d like to increase higher education funding, stimulate economic and job growth, and enact tax, pension and budget reform. 

As part of his plan to stimulate job growth and economic growth, the Governor’s Office notes that one of the governor’s top priorities is to foster “a business-friendly economy and creating jobs.” To successfully address job creation, the governor will be focusing on a number of program ideas, including the California Jobs Initiative and a further expansion of the $10,000 homebuyer tax credit “to include the purchase of existing homes in addition to new residences for first-time homebuyers.”

In 2009, the state offered about $100 million worth of tax credits to first-time homebuyers. According to the State of California State Franchise Tax Board, more than 12,000 applications from first-time homebuyers were received before the final applications were processed on August 31, 2009. Between May 13, 2009 and August 31, 2009, the State of California Franchise Tax Board gave $96,753,468 in tax credits to state citizens.

On January 11, Schwarzenegger made a speech in Torrance where he noted that if accepted by the legislature, the packages will be worth $500 million and is projected to “do amazing things,” such as “train 140,000 workers, avoid layoffs and create a more business-friendly economy” and also create 100,000 additional jobs. The governor also shared his hope that if passed, the package would pave the way for businesses to be reimbursed for every formerly unemployed state citizen who is employed and trained by said business.

It’s nice to see the governor looking to improve the business climate in California, even if through somewhat roundabout measures. Right now, any tax credit is an important step in the right direction for a state with a housing market hit incredibly hard by the stock market bubble bursting, and ironically, still one of the most expensive places in the world to live. Hopefully the legislature, which has time and again proved to be immune to the concept of applying sound economic principles to governmental decisions, will thoughtfully weigh the costs and benefits of providing tax credits to responsible homeowners.