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The Biden $15k First-Time Homebuyer Tax Credit: Explained

On April 28, 2021, U.S. lawmakers proposed the First-Time Homebuyer Act, introducing a potential $15,000 refundable federal tax credit for first-time homebuyers—a powerful initiative aimed at helping low- and middle-income Americans achieve homeownership.

The eligibility requirements for this tax credit are still undetermined and the bill has not yet been passed into law. In this post, we'll look at potential impacts of the First-Time Homebuyer Tax Credit in Florida, how it differs from other similar programs, and the criteria one must meet to be eligible.

What is the Current Status?

The First-Time Homebuyer Tax Credit, proposed by U.S. lawmakers on April 28, 2021, remains a bill as of March 15, 2023 and has yet to be passed into law.

This bill seeks to amend the IRS tax code by providing first-time homebuyers with refundable federal tax credits of up to $15,000 in order to help low- and middle-income Americans achieve homeownership.

However, until it is enacted into law, its potential impact remains uncertain.

What is the $15,000 First-Time Homebuyer Tax Credit?

The First-Time Homebuyer Tax Credit, also termed the First-Time Homebuyer Act, provides eligible first-time homebuyers a refundable federal tax credit of up to $15,000. Qualifying criteria must be met in order to be eligible.

This bill is intended to create wealth building opportunities within marginalized communities, something that President Biden has vowed to do by increasing access to homeownership for millions of renters who aspire to own homes for themselves and their families.

In order to qualify for the First-Time Homebuyer Tax Credit, a home buyer must meet the following criteria:

  • Be a first-time home buyer, having not owned a home within the last 36 months.

  • Not exceed income limitations established by the area of purchase.

  • Purchase a primary residence – second homes or rental properties are not eligible.

  • Be at least 18 years of age, or be married to someone who is 18 years of age.

  • Purchase the home from a non-relative.

How Does the First-Time Homebuyer Act Work?

The First-Time Homebuyer Tax Credit, also named the First-Time Homebuyer Act, is a non-repayable $15,000 credit to eligible first-time homebuyers. It is not a loan or a cash grant like the Down Payment Toward Equity Act.

Rather, this tax credit offers up to 10% of the home's purchase price with a maximum of $15,000 for 2021 inflation-adjusted dollars.

Accounting for a 5% inflation rate, the maximum amount of the first-time homebuyer tax credit will increase in the following amounts over the next five years:

  • 2021 - Maximum tax credit of $15,000

  • 2022 - Maximum tax credit of $15,750

  • 2023 - Maximum tax credit of $16,538

  • 2024 - Maximum tax credit of $17,364

  • 2025 - Maximum tax credit of $18,233

When you receive a tax credit, it is automatically deducted from your federal taxes or refunded to you. Married households that file their taxes separately can each claim up to half of the available credit.

Non-married buyers are also entitled to their proportional share. It's important to remember that the first-time homebuyer tax credit will always be limited to the maximum amount set by law.

When Can You Receive the $15,000 Tax Credit?

If the First-Time Homebuyer Act is passed, qualified first-time homebuyers will be eligible to receive their tax credit immediately with no further action beyond filing a tax return.

Any remaining balance lower than $15,000 will be deposited into the taxpayer’s account via direct deposit. This program applies to all homes purchased beginning January 1, 2021 and there is currently no set expiration date.

Additionally, the $15,000 tax credit has the possibility of becoming a long-term incentive.

Who Is Eligible For The First-Time Homebuyer Tax Credit?

Currently, homebuyers who satisfy all of the following criteria are eligible to receive the tax credit from the First-Time Homebuyer Act:

  • Must be a first-time home buyer - To qualify for the First-Time Homebuyer Tax Credit, the homebuyer must not have owned a home or been a co-signer on a mortgage loan in the previous thirty-six months. This encompasses primary residences, second homes, and vacation rentals. This requirement ensures that the tax credit benefits individuals who are truly first-time homebuyers.

  • Must be using the first-time buyer tax credit for the first time - The First-Time Homebuyer Tax Credit is a one-time benefit. Homebuyers who use the tax credit to purchase a home in one year may not use it again in subsequent years. For example, if an individual utilizes the tax credit to buy a home in 2023, they will not be eligible to use it again in 2027.

  • Must earn a modest income based on location and household size - To be eligible for the First-Time Homebuyer Tax Credit, home buyers must meet income requirements that are specific to their location and household size. The income limit is set at 60% above the median income for the area.. However, households with multiple income earners, including joint-filers who are married or unmarried, may be eligible for higher income limits.

  • Must be 18 years of age or older - In order to be eligible for the first-time homebuyer tax credit, the buyer must be at least 18 years old when buying the property. If married, both parties must meet this requirement. This condition ensures that adults cannot buy a home in a child's name and use their tax return to claim the credit.

  • Must be purchasing the home from a non-relative - The tax credit is only available to those who do not buy their home from a family member, including spouses, parents, children, uncles/aunts, cousins or grandparents. The bill does not provide precise rules for buying a property from an entity managed by a relative (e.g. trust).

Notebook with tax credit sign on a table

How to Receive Your $15,000 Tax Credit

When it comes to claiming the tax credit under the First-Time Homebuyer Act, the specific process remains unclear.

However, it is anticipated that this 2021 version of the credit should follow largely in line with the prior First-Time Homebuyer Credit program from 2009, which involved an additional IRS form to be included as part of a federal tax filing.

An important point to note is that this act is retroactive starting December 31, 2020. This means home buyers who purchased a home in 2020 can file an amended return and receive an instant cash payout from the U.S. Treasury.

To maximize its benefits and understand how claiming the tax credit may affect your overall tax situation, it is necessary to contact a qualified accountant for details.

Taking advantage of this incentive could make home ownership more attainable and affordable for many first-time home buyers.

If You Move Within 4 Years, You’ll Have To Pay Some Money Back

The First-Time Homebuyer Act is designed to provide financial assistance and create opportunities for low- and middle-income households to build long-term wealth through homeownership. It is not meant to be used as a short-term gain for house-flippers or real estate investors.

Should a buyer use the tax credit and then choose to either change their primary residence or sell the home within four years of purchase, they could be subject to a prorated tax liability calculated by the amount of time that has passed since ownership and based on the amount of the initial credit received. This total amount will be added onto the homeowner's federal tax bill.

For those taking advantage of the First-Time Homebuyer Act, there are tax credit requirements that must be met in order to avoid any potential liabilities.

For example, if a buyer receives a $15,000 tax credit and sells their home within two years of purchase, they would owe half of the original amount ($7,500) as a consequence of not fulfilling the four-year residency term.

However, there are certain exemptions that could apply depending on the circumstances, such as in cases where the homeowner must sell due to health concerns or job relocation.

Therefore, it's important for first-time homebuyers to understand all the criteria and potential repercussions associated with the credit before making any decisions.

It is strongly recommended that buyers consult with a qualified accountant or financial advisor to get proper advice and make sure they can reap the full advantages of this program.

What Are the Chances of the $15,000 First Time Home Buyer Tax Credit Act Passing?

The $15,000 First-Time Home Buyer Tax Credit is likely to be approved by Congress as it bears a resemblance to the successful 2008 Housing and Economic Recovery Act, which had an $8,000 First-Time Home Buyer Tax Credit.

This program was designed to encourage home buying activity and help first-time buyers fulfill their wish of homeownership.

The 2008 program received largely positive reviews with over 2.3 million applicants claiming the credit, giving rise to expectations that the new credit will bring similar success. Thanks to its success, the previous program ended up being extended multiple times until 2010.

Furthermore, the new bill seeks to benefit low- and middle-income households, which is in line with the government's current efforts to improve access to cost-effective housing and form a foundation of wealth for hardworking families.

With the 2008 program having been viewed as successful, this makes it very likely that the First-Time Home Buyer Act will get approval in Congress and become law.

What Does the Down Payment Toward Equity Act Do?

Florida residents might be interested to know that two housing-related legislative bills have recently been introduced. The First-Time Homebuyer Tax Credit offers eligible buyers a tax credit of up to $15,000, while the Down Payment Toward Equity Act proposes paying out $25,000 in cash to eligible home purchasers to contribute towards closing costs, taxes and interest.

The Down Payment Toward Equity Act seeks to address inequalities in homeownership that particularly affect Black and Latinx households who have been impacted by discriminatory lending practices and redlining over the years. This proposed cash payment could help such households bridge the financial gap associated with purchasing a home.

By coming together, these two pieces of legislation could offer potential first-time homeowners a generous incentive of up to $40,000 in benefits.

This could be an effective way to increase homeownership rates while providing greater security and stability to renters, who have been hard hit by increasing housing costs and a volatile rental market. Ultimately though, it remains to be seen if both bills will make it through Congress and get signed into law.

Frequently Asked Questions About The $15,000 First-Time Homebuyer Tax Credit and First-Time Homebuyer Act

Here are some of the most frequently asked questions.

  • Is this program the same as the Biden First-Time Homebuyer Act? While it may go by many different names, including the Biden First-Time Homebuyer Tax Credit, the Biden Homebuyer Credit and the $15,000 Homebuyer Tax Credit, they all refer to the same legislation - the First-Time Homebuyer Act.

  • Is the $15,000 Home Buyer Tax Credit available yet? The $15,000 first-time homebuyer tax credit is currently still a proposal being considered by Congress and so is not yet available. However, its status could change soon and it is likely that the bill will be passed in some form before the end of the year.

  • How do I apply for the $15,000 Home Buyer Grant? Home buyers who meet the eligibility requirements for the $15,000 first-time home buyer tax credit don't need to apply for it as it is automatically earned. The IRS will credit the eligible buyer's tax bill for this amount.

  • If I have to move for work during the first four years, do I have to repay the $15,000 tax credit? If you use the program and sell your home or change your primary residence within four years, you will usually have to pay back at least a part of the tax credit. However, there are exemptions to this rule, including in cases of death or military transfers.

  • If I’m a first-time home buyer but my fiancee is not a first-time home buyer, can we claim the $15,000 first-time home buyer tax credit ? For Florida home buyers, it is possible to claim the first-time home buyer tax credit even if only one person in the purchase is a first-time buyer. However, in this case the credit amount will be reduced by 50%, meaning that the first-time home buyer would be able to claim up to $7,500 on their Florida state tax return.

  • When I buy a home and use the $15,000 first-time home buyer tax credit, what is the official date of the credit – on the day I sign the contract for the home or on the day of closing? When you purchase a home and claim the $15,000 first-time home buyer tax credit, it is effective on the date of closing.

  • Is the $15,000 first-time home buyer tax credit available for trailer homes, mobile homes, and manufactured homes? The first-time buyer program is available to all types of residential properties, including traditional houses, trailer homes, mobile homes, and manufactured homes. Eligible buyers can apply for the program regardless of the type of property they are purchasing.

  • Is the $15,000 First-Time Homebuyer Act the same thing as the $25,000 program I’ve heard about? The $15,000 First-Time Homebuyer Act of 2021 and the $25,000 program for first-time home buyers, called the Down Payment Toward Equity Act of 2021, are two distinct programs. Each program has its own eligibility requirements and provides different benefits for first-time home buyers. However, it is possible for eligible buyers to qualify for both programs, resulting in a total assistance amount of $40,000.

Contact Us Today

With the First-Time Homebuyer Act of 2021, it's possible to access up to $40,000 in assistance. MakeFloridaYourHome is here to guide you through this process and make it as simple as possible.

Our team of professionals will help you determine your eligibility for the tax credit, answer any questions you may have, and ensure that you receive all the benefits available under the program.

Do you dream of owning a home? MakeFloridaYourHome is here to help make it a reality! We will work with you to find the perfect property that meets your needs and budget.

Plus, with the First-Time Homebuyer Act of 2021, you could be eligible for up to $40,000 in assistance. Let us help you get started today and take the first step towards homeownership!

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