Alternative name: $15,000 First-Time Homebuyer Tax Credit
The First-Time Homebuyers Act of 2021 intends to help households with lower incomes purchase homes. According to the bill, individuals and married people who file jointly would qualify for a tax credit worth up to o$15,000. Unmarried individuals who purchase a home together could split the credit and married couples filing separately would also receive a $7,500 tax credit each. To qualify for the proposed credit, your modified adjusted gross income can’t exceed 160% of the median income in the area where the property is located. The purchase price of the home can’t exceed 110% of the area’s median home purchase price.
History and Examples
In recent years, first-time homebuyer tax credits have proved very successful. The Housing and Economic Recovery Act of 2008 provided up to an $8,000 tax credit for first-time homebuyers and was claimed by close to 1.5 million purchasers, according to Congressman Blumenauer. Here are a few examples of how this new version could work. If you were a first-time homebuyer and met the rest of the criteria for the tax credit, you’d be able to claim up to $15,000 of the home’s purchase price as a deduction on your taxes. This lowers the amount of taxable income you have to report, which lowers your taxes for that tax year. Let’s say your city has a median income of $50,000. You could qualify for the tax credit if you have a modified adjusted gross income of up to $80,000 (below the 160% threshold). If your city has a median home price of $150,000, you could qualify for the credit when purchasing a home priced up to $165,000 (below the 110% threshold). You’d then be able to claim $15,000 on this home. The credit is a refundable tax credit, which means that the credit you receive from the purchase offsets the amount of taxes you owe. For example, if you owed $3,500 in taxes but received a $10,000 credit from a home purchase, you’d get a refund of $6,500 when you filed your taxes.
Who Would Qualify for the First-Time Homebuyer Act?
First-time homebuyers with incomes below 160% of their area’s median income qualify. To calculate that, find your area’s median income and multiply it by 1.6. That would be the maximum income you could earn to qualify. For example, if your area’s median income is $50,000, you could not earn an income of more than $80,000. Qualified homes must have a purchase price at or below 110% of an area’s median sales price. You could use the same calculation as above, but with 1.1. For example, if your area’s median sales price for a home is $150,000, your home’s purchase price would need to be $165,000 or less. There are other requirements as well, such as being 18 years or older. As the bill is currently written, to receive the credit, first-time homebuyers also need to meet the following requirements:
Not have any homeownership interest in the three years previous to the purchaseNot have already used the credit in another tax yearCan’t claim a home that was acquired from a relativeCan’t have the property’s basis determined from the previous owner’s basisCan’t sell the property or not use it as a primary residence during the tax year they are claimingCan’t claim the credit if another taxpayer is claiming it for the same tax yearWill not be approved for the credit if an official copy of the settlement statement is not included with the filing
