Governor Arnold Schwarzenegger recently signed legislation offering up to a $10,000 tax credit for purchase of a home.

This comes on top of a soon-to-expire federal tax credit of $8,000 for first-time buyers and $6,500 for repeat buyers under a plan approved by the Obama Administration, which also was designed to bolster the economic recovery by fueling home sales, typically one of the most important sectors of the economy in any recovery.

California’s previous home buyer tax credit program was so successful that it ran out of tax credits by the end of June 2009, eight months before it was set to expire and just as the housing market appeared to be turning the corner.

Unlike last year’s legislation, this year’s Homebuyer Tax Credit recently signed into law adds a tax credit for the purchase of an existing home by a first-time home buyer.

Be sure to consult a Realtor and a tax specialist to ensure all of the benefits of the state and federal credits are fully captured. For detailed information regarding the California credits go online to the Franchise Tax Board’s website at ftb.ca.gov. Check the FTB’s website regularly as updates will be added as they become available.

Some of the most important details of this once-in-a-lifetime opportunity for prospective home buyers include:

The 2010 New Home Credit and First-Time Buyer Credit begins May 1, 2010.

• The New Home/First-Time Buyer Credits are available only for purchases that close escrow on or after May 1.

• The home must be the buyer’s principal residence for at least two years after the date of purchase.

• Applications must be submitted after escrow closes. The new application will be available by May 1. (The FTB will deny the application if the 2009 form is used or if the 2010 application is received by the FTB before May 1, 2010.)

General Information: These tax credits are available for taxpayers who purchase a qualified principal residence on or after May 1 and before January 1, 2011. Additionally, the New Home Credit is available for taxpayers who purchase a qualified principal residence on or after Dec. 31, 2010, and before Aug. 1, 2011, so long as an enforceable contract is executed on or before Dec. 31, 2010. The purchase date is defined as the date escrow closes.

• The tax credits are limited to the lesser of 5 percent of the purchase price or $10,000 for a qualified principal residence.

• Taxpayers must apply the total tax credit in equal amounts over three successive tax years (maximum of $3,333 per year) beginning with the tax year in which the home is purchased. The tax credits are nonrefundable and unused credits cannot be carried over.

• 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.

• The FTB will allocate the tax credits on a first-come, first-served basis. Only one tax credit is allowed per taxpayer.

Taxpayers will not be eligible for either tax credit if any of the following apply:

• The taxpayer was allowed a 2009 New Home Credit.

• The taxpayer is under 18 years old. (A taxpayer who is married as of the date of purchase will be considered to be 18 if the spouse/registered domestic partner of the taxpayer is 18 or older on the date of purchase.)

• The taxpayer or the taxpayer’s spouse or registered domestic partner is related to the seller.

• The taxpayer qualifies as a dependent of any other tax-payer for the tax year of the purchase.

Additional information will be presented in coming weeks on this page. For all full details and the most recent updates, be sure to visit the Franchise Tax Board’s website at ftb.ca.gov.