This is a bill introduced to Congress on paign promise from President Joe Biden: to give a $15,000 tax credit – or up to 10% of the home’s price – to eligible first-time homebuyers.
The goal of the new proposed legislation, called the “First-Time Homebuyer Act of 2021,” is to reduce the wealth gap by giving renters a chance to become owners despite skyrocketing housing costs.
Down payment is typically the biggest barrier to entry when it comes to homeownership. Some renters would even pay less monthly for a mortgage than for rent. But saving for a down payment has thus far kept them from moving forward.
Would the assistance be available in advance so I could use it when I’m buying?
No. The assistance would come in the form of a tax credit. As an example, you would purchase a home in 2021 and claim the $15,000 credit when you file taxes in 2022.
This is different than Biden first proposed on the campaign trail. His vision was an “advanceable tax credit” which would be available at the closing table.
However, according to the website of U.S. Congressman Earl Blumenauer (D-OR), who introduced the bill, “Taxpayers may elect to treat the purchase of their home as occurring in the prior taxable year to receive the credit sooner.”
That might mean that someone could claim the home purchase as happening in 2020, then re-file their taxes in 2021 to receive the credit. Expect more details on re-filing guidance as this bill develops.
Knowing they have an additional $15,000 coming in their tax return could inspire confidence to draw on savings for the initial down payment.
Can I get this credit if I use a zero-down loan?
Home buyers who use a zero-down USDA loan or VA home loan can receive the credit and to do with what are online installment loans legal in Minnesota they wish: cover money spent on closing costs or help with their first year of homeownership.
This is a “refundable tax credit.” What does that mean?
“Refundable tax credit” means that you can receive the funds in your tax return even if you don’t owe that much in taxes.
For instance, you file your 2021 taxes in and have a $1,500 refund. Claiming the tax credit, you would receive a $16,500 refund.
Will I qualify for the $15,000 homebuyer tax credit?
Keep in mind that bills can go through many revisions as they make their way through Congress. But here’s who is eligible as of this writing. Homebuyers must meet all the requirements, not just one.
- First-time homebuyers, meaning you or your spouse have not owned a home in the past 3 years
- Those with incomes at or below 160% of the area median income
- Those purchasing a home at or below 110% of the area median purchase price
A couple is buying in an area with a median income of $80,000 and median home price of $300,000. Their combined income is $120,000 and they are buying a home at $310,000.
? $120,000 = 150% of the area median income of $80,000. Eligible? $310,000 = 103% of area median home price. Eligible? Neither has owned a home in the past 3 years. Eligible
When will the $15k first-time homebuyer credit be available?
There are no estimates on timing yet. The bill is still in early stages of approval. It would have to make it through the House and Senate, then be signed into law.
Fortunately, a first-time buyer credit is widely popular and received a lot of attention during Biden’s campaign, improving the chances of passing.