SAN FRANCISCO (MarketWatch) -- It's getting more rewarding to be a home buyer.

There's the $8,000 federal tax credit for first-time home buyers. And now California has upped the ante, offering a tax credit worth up to $10,000 to any home buyer, first time or not, of any income level, who buys a home between March 1, 2009 and March 1, 2010.

There's just one hitch: You have to buy a newly-constructed home that's never been lived in.

That's a big boon for home builders, and that might help spur hiring -- a good thing for California's economy. But for homeowners struggling to sell their existing homes, this may bring some tough competition, encouraging buyers to focus on new houses.

California Gov. Arnold Schwarzenegger signed the tax credit into law Feb. 20, one of a group of bills aimed at closing the state's $42 billion budget gap. California is so far the only state to implement a home-buying tax break in this recession, according to the National Conference of State Legislatures. Since 1997 the District of Columbia has offered a tax break worth up to $5,000 for some first-time home buyers, while Montana has a home-buyer savings account plan that includes a tax break, the NCSL said.

The aim of the California credit? Stimulating the state's ailing economy, said Camille Anderson, a spokeswoman for the governor.

The governor "fought for stimulus measures like the $10,000 housing tax credit to encourage home buyers back into the market and to stimulate California's economy," Anderson said. "If you were thinking of buying a new home but weren't sure if it's the right time, California's new state budget may have just given you 10,000 reasons to move forward on a purchase."

Californians can claim both the state and federal tax credits if they qualify, said Daniel Morris, a certified public accountant and managing partner at San Jose, Calif.-based Morris & D'Angelo.

But from a policy perspective, Morris and others say the new tax credit may be bad news for the state's struggling homeowners.

"As a policy, the concern is, are we giving an unfair advantage to new houses over used houses? People dealing with foreclosure are living in used houses," Morris said.

"This benefits people who have hammers and nails ... that's great for stimulating the employment side but isn't going to stop foreclosure pain," he said.

Still, Morris said, for people looking to buy a home it's a valuable credit, worth 5% of the home's value up to $10,000.

There are some other limitations: The credit is available for just one year. Also, the state allocated $100 million to the credit -- once the funds run out, so does the tax break. And taxpayers must live in the home for two years or pay the credit back, Morris said. The state tax agency will pay out the credit over three years; thus, taxpayers would receive the credit in 2009, 2010 and 2011, or in 2010, 2011, and 2012.

Unlike the federal tax credit, which is available to home buyers on their 2008 returns even if they bought in 2009, the California tax credit is available only on 2009 or 2010 tax returns, Morris said.

While the federal credit is limited to taxpayers with adjusted gross income of $75,000 or less ($150,000 for married couples filing jointly), the California tax credit is available to people of any income.