Tax Credit Increases to $10,000 for
First Time Home Buyers!

On Monday, March 22, 2010, Governor Arnold Schwarzenegger and lawmakers agreed to trim $1.1 billion from mass transit but give new tax breaks to home buyers and green-technology companies.

The key element of the legislation is the tax credit of up to $10,000 for first-time home buyers and those purchasing newly built homes. Buyers can receive 5% of a home purchase price back as a state tax credit, up to $10,000, as long they reside there for two years. It would take effect May 1.

Another element of the package would allow companies that buy green-technology manufacturing equipment to avoid sales tax on those purchases for 10 years. It would start immediately.

To get at the money, lawmakers and the governor are rewriting gasoline-tax laws, swapping a levy that state law designates for mass transit with a tax that can be directed to closing the deficit. The plan preserved more than $400 million in the budget for bus and rail systems, at the insistence of Democrats. Schwarzenegger had initially pushed to eliminate state funding for mass transit entirely.

Monday's deal marks the first dent Sacramento has made in California's deficit. Schwarzenegger vetoed earlier legislation that Democrats said would have cut more than $2 billion more from the budget.

"The package of bills as written will provide significant benefit to the state's general fund and will help put Californians back to work," Gov. Schwarzenegger said in a statement. He expects to sign the rest of the package later in the week.