Personal income taxes: credit: qualified principal residence.
If enacted, AB 155 could have significant implications for state tax law by introducing a mechanism specifically tailored to support the construction of affordable single-family homes. The contingent requirement that these homes remain the principal residence of the taxpayer ensures that the credit serves its purpose of promoting stable homeownership rather than speculative investment. Additionally, the bill's provisions for the recapture of the credit in cases where the housing status changes will safeguard the state's tax revenue and maintain the integrity of the program. The sunset clause, which mandates the repeal of the credit after December 1, 2025, highlights the temporary nature of this fiscal measure and emphasizes the legislature's intention to reevaluate its effectiveness before any potential renewal.
Assembly Bill 155, introduced by Assembly Member Voepel, focuses on providing a tax incentive for individuals who construct a qualified principal residence. This legislation allocates a personal income tax credit of $5,000 for each taxable year from January 1, 2020, to January 1, 2025. To qualify for this credit, the constructed residence must not surpass a cost of $350,000 and must be occupied by the taxpayer as their principal residence for a minimum of the first five taxable years following the tax year in which the taxpayer claims the credit. This initiative is primarily aimed at encouraging homeownership by reducing the financial burden of construction costs during the initial years of residence.
While proponents believe that AB 155 addresses the critical issue of housing affordability, there may be contention surrounding the stipulations of the tax credit itself. Some critics could argue that setting the building cost limit at $350,000 may not be inclusive enough of various regions within the state, where housing costs can vastly exceed this amount. Moreover, the focus on newly built residences may also hinder access for those looking to purchase existing homes, potentially limiting the broader impact on housing accessibility. The requirement that the credit only applies while the residence is used as a principal home may further raise concerns among potential investors and homeowners who need flexible living arrangements.