What is the First-Time Homebuyer Act of 2021?
The newly proposed First-Time Homebuyer Act intends to make homeownership accessible to low- and middle-income Americans. This measure has not yet been signed into law.
Continue reading to see what the $15,000 First-Time Homebuyer Tax Credit Act may mean if it becomes law and how home buyers qualify.
What is a First-time Buyer?
A first-time buyer may have different meanings depending on the situation. To qualify for H.R.2863 and the large majority of programs geared towards first-timers, the borrower must meet the following criteria by the U.S. Department of Housing and Urban Development (HUD). According to the Department of Housing and Urban Development, a first-time buyer is:
- Someone who hasn't owned a primary residence for at least three years before the new home's acquisition date.
- If the borrower's spouse is a homeowner, but the borrower has not owned in the past three years, the couple qualifies.
- Any single parent who co-owned a house with their ex-spouse
- A displaced homemaker who only had ownership of one property with their significant other
How Does the New First-Time Homebuyer Act Work?
The First-Time Homebuyers Act of 2021 aims to assist low- and middle-income families in purchasing their first home. The program provides a tax credit for the same year the home was purchased.
The homebuyer must be at least 18 years old and can't have had any ownership stake in a property in the preceding three years to qualify for the program.
The tax credit amount depends on the home's purchase price. Buyers get up to 10% of the home's purchase price with a maximum credit of $15,000.
Individuals and married couples filing jointly may get up to a $15,000 tax credit under the measure.
Unmarried couples who buy a house may claim their proportional share of the credit. In contrast, married couples who file separately can claim half (up to $7,500) of the available credit.
To be eligible for the proposed credit, the buyer's modified adjusted gross income can't be more than 160% of the median income in the property's location.
The price of the home can't be more than 110% of the area's median home value.
The credit is a refundable tax credit, which means that the benefit offsets the amount of taxes the taxpayer owes.
5 H.R.2863 - First-Time Homebuyer Act of 2021 FAQs
- Is there a first-time homebuyer tax credit for 2021 IRS?
Lawmakers presented the First-Time Homebuyer Act of 2021 on April 28, 2021. The measure amends the IRS tax law to provide up to $15,000 in refundable federal tax credits to first-time homeowners. However, the bill is not law as of the date of this publication.
- What is the definition of a first-time homebuyer?
A first-time buyer has not owned a house for three years before the new property's purchase date. Even if the borrower's spouse is a homeowner, the couple can still qualify as first-time buyers if they meet other criteria.
- How does buying a house affect personal taxes?
Homeowners who itemize their deductions may deduct mortgage interest, property taxes and other costs from their federal taxable income. Another advantage of owning a property is that the imputed rental income received by homeowners is not taxed.
- How does the government know if a candidate is a first-time buyer?
By examining the land registration for the applicant's name, government officials can determine whether the buyer is a first-time buyer. Similarly, agents can look at the borrower's credit history to discover whether the person has ever had a mortgage.
- How do I qualify for the H.R.2863 tax credit?
Modified adjusted gross income must not exceed 160 percent of the median income in the region where the property is situated to qualify for the proposed credit. The home's purchasing price cannot exceed 110 percent of the area's median home value.
The First-Time Homebuyer Act is a bill that, if passed into law, would grant a federal tax credit of up to $15,000 to first-time homeowners. Homebuyers must meet income restrictions and purchase a house within specific price ranges to be eligible for the credit.
The First-Time Homebuyer Act of 2021 is currently in Congress