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The $15,000 First-Time Home Buyer Tax Credit: Reviewed

Update: This article refers to First-Time Homebuyer Tax Credit Act of 2024, a bicameral bill in the 2023-2024 Congress. For information about the mortgage tax credit program introduced in the State of the Union Address, March 2024, read about the $10,000 Mortgage Relief Tax Credit.

The First-Time Homebuyer Tax Credit Act of 2024 is a new bill that gives first-time home buyers up to $15,000 in federal tax credits. These credits can be paid in cash or claimed at closing for down payment assistance.

The bill’s official name is H.R.7707 in the House of Representatives and S.3940 in the Senate. It’s often associated with President Biden and is sometimes called the Biden First-Time Home Buyer Tax Credit.

The bill is also referred in the news and industry professionals as:

  • The $15,000 First-Time Homebuyer Tax Credit
  • The Biden First-Time Home Buyer Plan
  • The First-Time Home Buyer Credit

Congress introduced the First-Time Homebuyer Act on April 28, 2021. The bill did not pass in the last congressional session. It was later renewed with its updated name – the First-Time Homebuyer Tax Credit Act – in the Senate on March 14, 2024, sponsored by Sen. Sheldon Whitehouse, and in the House of Representatives on March 15, 2024, sponsored by Rep. Jimmy Panetta.

The first-time buyer program offsets current mortgage rates and rising housing costs.

The revamped 2024 version of the bill is more favorable to home buyers than its original. Under the new bill, home buyers can claim their tax credit immediately, receiving their $15,000 at closing, which can be applied toward a down payment, closing costs, and other transaction fees.

As of April 17, 2024, the First-Time Homebuyer Tax Credit Act of 2024 has yet to become law.

This article explains the $15,000 First-Time Homebuyer Tax Credit, who’s eligible, and how it differs from other first-time home buyer programs.

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The $15,000 First-Time Home Buyer Tax Credit Act of 2024 [NEW!]

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

The First-Time Homebuyer Tax Credit is a $15,000 federal tax credit for first-time home buyers. It is not yet passed into law.

Eligible home buyers must meet the following criteria, according to the bill’s most recent language.


1. Must be a first-time home buyer

Eligible home buyers may not have owned a home or been a co-signer on a mortgage loan within the last thirty-six months, encompassing primary residences, second homes, and vacation rentals. Buyers who owned a home more than thirty-six months ago and home buyers who own commercial properties through a business remain eligible.


2. Must be using the first-time buyer tax credit for the first time

Eligible home buyers may use their tax credit once only. Suppose you claim your federal tax credit under the First-Time Homebuyer Act in 2024, for example. In that case, you may not claim the credit again. 


3. Must earn a modest income based on location and household size

Eligible home buyers must earn an income within 150 percent of the area’s median income, based on their household size, after which the available tax credit begins phasing out. For example, in Columbus, Ohio, where a standard median household income is $63,000, eligible home buyers who file as single earners must have a household income of less than $94,500 annually.

For home buyers who earn more than 150% of the area median income based on household members, the tax credit phases out $750 for every $1,000 over the limit.

If Your Income Exceeds By AMI By…Your Tax Credit Is…
$0$15,000
$1,000$14,250
$2,000$13,500
$3,000$12,750
$4,000$12,000
$5,000$11,250
$6,000$10,500
$7,000$9,750
$8,000$9,000
$9,000$8,250
$10,000$7,500
$11,000$6,750
$12,000$6,000
$13,000$5,250
$14,000$4,500
$15,000$3,750
$16,000$3,000
$17,000$2,250
$18,000$1,500
$19,000$750
$20,000$0

4. Must purchase a modest home for the area

Eligible home buyers must purchase a home that falls within 110 percent of the area median purchase price, after which the available tax credit begins phasing out. For example, in Milwaukee, Wisconsin, where the median purchase price is $372,400, eligible homes must have a purchase price which is at most $409,640.

For every 1 percentage point that the home’s purchase exceeds the 110% area median purchase price limit, the home buyer’s tax credit award is reduced by $1,000.

If The Purchase Price Exceeds The Median By…Your Tax Credit Is…
$0$15,000
$1,000$14,000
$2,000$13,000
$3,000$12,000
$4,000$11,000
$5,000$10,000
$6,000$9,000
$7,000$8,000
$8,000$7,000
$9,000$6,000
$10,000$5,000
$11,000$4,000
$12,000$3,000
$13,000$2,000
$14,000$1,000
$15,000$0

5. Must be 18 years of age or older

Eligible home buyers must be 18 years of age on the date of purchase or married to a person at least 18 years of age. This rule prevents adults from buying a home with cash in a child’s name, then claiming the tax credit on the child’s income tax returns.


6. Must be purchasing the home from a non-relative

Eligible home buyers must be making an arms-length transaction. They may not purchase their home from a relative, including a spouse, parent, child, aunt, uncle, cousin, or grandparent. The bill provides no specific guidance regarding purchasing a home from an entity controlled by a relative, such as a trust.

Did The First-Time Homebuyer Act Pass Yet? 

As of April 17, 2024, Congress must still enact the First-Time Homebuyer Act. It’s an active bill with multiple co-sponsors but is not yet scheduled for a vote.

This is the second time the First-Time Homebuyer Act has been discussed with Congress. In the 2021-2022 congressional session, a similar $15,000 first-time home buyer tax credit was proposed, but that bill failed to get a vote.

It’s common for the legislative process to span multiple Congresses – especially for programs important to the current administration.

For example, President Biden often speaks of inclusion, fairness, and equality for first-time home buyers, including:

  • Ensuring fair economic opportunities for all
  • Addressing systemic racism and inequality
  • Equitable treatment for historically marginalized communities

The First-Time Homebuyer Act of 2024 reflects these ideas.

As of April 17, 2024, the House version of the bill, H.R.7707, has 1 cosponsor:

Representative District Date
Rep. Blumenauer, Earl [D-OR-3] March 15, 2024

As of April 17, 2024, the Senate version of the bill, S.3940, has 8 cosponsors:

Senator State Date
Sen. Heinrich, Martin [D-NM] March 14, 2024
Sen. Welch, Peter [D-VT] March 14, 2024
Sen. Smith, Tina [D-MN] March 14, 2024
Sen. Reed, Jack [D-RI] March 14, 2024
Sen. Baldwin, Tammy [D-WI] March 14, 2024
Sen. Rosen, Jacky [D-NV] March 14, 2024
Sen. Blumenthal, Richard [D-CT] March 19, 2024
Sen. Van Hollen, Chris [D-MD] April 15, 2024

How Does the First-Time Homebuyer Act Work?

The First-Time Homebuyer Tax Credit is a tax refund from the U.S. Treasury. It’s claimable retroactive to the last calendar tax year, and payable at closing with the help of a mortgage company or when the IRS processes a buyer’s tax returns.

The refund is a cash payment and qualifies as down payment assistance.

The First-Time Homebuyer Act pays eligible first-time buyers a tax refund of 10% of a home’s purchase price, up to $15,000, and makes annual adjustments for inflation.

Assuming 3 percent inflation over the next five years, here’s how big the tax credit can get

  • 2024: Maximum tax credit of $15,000
  • 2025: Maximum tax credit of $15,450
  • 2026: Maximum tax credit of $16,068
  • 2027: Maximum tax credit of $16,711
  • 2028: Maximum tax credit of $17,379

Married households who file their taxes separately may claim half of the available credit, and non-married buyers may claim their proportional share of the credit.

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

The First-Time Homebuyer Act builds long-term wealth for low- and middle-income households through real estate. It specifically legislates away from house flippers and real estate investors.

Therefore, buyers claiming the credit who change their primary residence or sell their home within four years of purchase will realize a tax liability for moving out.

Assuming a $15,000 tax credit:

  • Sell or move within Year 1: Repay 100% in taxes / $15,000
  • Sell or move within Year 2: Repay 75% in taxes / $11,250
  • Sell or move within Year 3: Repay 50% in taxes / $7,500
  • Sell or move within Year 4: Repay 25% in taxes / $3,750

The repayment rule has exceptions.

One exception states that home buyers who sell their home within four years to a non-relative whose real estate gains are less than their tax liability must only pay their real estate gains.

For example, if you received a $15,000 credit when you bought your home, sold your home to somebody related to you in the first 12 months, and made five thousand dollars on the sale of your home, your tax repayment amount would be $5,000.

Other exceptions include death, divorce, and certain military transfers. 

When Will The $15,000 First-Time Homebuyer Tax Credit Act Pass?

The $15,000 First-Time Homebuyer Act is among the more likely first-time buyer programs to pass into law because the bill has precedent; it’s a modified version of the 2009 Obama-era $8,000 First-Time Homebuyer Tax Credit, which more than 2.6 million renters used to buy their first home. 

Today’s buyers have different needs compared to 15 years ago, still the market shows similarities as compared to 2009..

  • Not enough new construction homes available for purchase
  • Challenges with home affordability 
  • Fewer opportunities to build wealth through real estate

In its last election cycle, the Biden Administration pledged to make homes more affordable, increase wages among low-earning households, and reduce wealth gaps due to race. The First-Time Homebuyer Act meets all three criteria.

We expect the Biden Administration to make its tax credit program available leading up to the 2024 election. 

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Common Questions About The First-Time Homebuyer Act

Is this program the same as the Biden First-Time Homebuyer Act?

Yes, the First-Time Homebuyer Act is known by several names, including the Biden First-Time Homebuyer Tax Credit, the Biden Homebuyer Credit, and the $15,000 Homebuyer Tax Credit. They’re all the same thing.

Is the $15,000 Home Buyer Tax Credit available yet?

No, the $15,000 first-time homebuyer tax credit is not yet available. We expect the bill to pass into law in some form before the end of the year. Subscribe to our newsletter for updates on this and other bills.

When the First-Time Homebuyer Act passes, will it be retroactive?

Yes, the First-Time Homebuyer Act will be retroactive to December 31 of the preceding calendar year so eligible buyers can amend their federal tax returns and get an instant Treasury payment.

How do I apply for the $15,000 Home Buyer Grant?

Eligible first-time home buyers aren’t required to apply for the $15,000 first-time home buyer tax credit. When you meet the program’s eligibility requirements, the IRS credits your tax bill automatically.

If I have to move for work during the first four years, do I have to repay the $15,000 tax credit?

If you move or sell your home within four years of using the program, you must pay back at least some of your tax credit. There are exceptions for death and 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 tax credit?

Yes, you can claim the first-time home buyer tax credit if you purchase a home with a non-relative and only one of you is a first-time buyer. In this example, the credit reduces by 50%, and the first-time home buyer claims $7,500 on their tax returns.

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 buy a home and claim the $15,000 first-time home buyer tax credit, the tax credit’s effective date is 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 works for any home zoned for residential property, including trailer homes, mobile homes, and manufactured homes.

Is the $15,000 First-Time Homebuyer Act the same as the $25,000 program I’ve heard about?

No, the $15,000 First-Time Homebuyer Act is different from the $25,000 program. The $25,000 program for first-time home buyers is the Downpayment Toward Equity Act.

Can I use multiple first-time home buyer programs when I buy?

Yes, first-time home buyers can as many first-time home buyer programs for which they’re eligible.

How do I know if my income is too high for the First-Time Homebuyer Act?

Use this chart to find the median income for an area, then multiply that number by 1.6. Your income is eligible if your household income is less than or equal to the product.

Can I use the First-Time Homebuyer Act to buy a multi-unit home and rent out the other units?

Yes, you can use your first-time home buyer tax credit to purchase a multi-unit home if one of the units is your primary residence.

Is the Downpayment Toward Equity Act the same as the First-Time Homebuyer Tax Credit?

No, the Downpayment Toward Equity Act differs from the First-Time Homebuyer Tax Credit. The Downpayment Toward Equity Act is a bill that proposes $25,000 cash grants to offset closing costs, taxes, and interest for eligible first-time buyers. The bills could be combined, creating a forty-thousand-dollar incentive for renters to buy their first home.

Are there other tax-related programs for first-time home buyers?

The American Dream Downpayment Act is a program in Congress that establishes tax-advantaged savings accounts for down payment costs. Also, the DASH Act gives a $15,000 tax credit for eligible buyers.

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Changelog

  • April 17, 2024: Added co-sponsors table for the House and Senate versions of the bill
  • April 11, 2024: Updated bill language; Re-recorded video to include the new terms from the 2024 version of the bill; Added table that shows how household income affects to tax credit award; Added table that shows how purchase price affects to tax credit award
  • April 10, 2024: Reverted the article to cover the newly-introduced First-Time Homebuyer Act of 2024, which replaced the First-Time Homebuyer Act of 2021. Moved information regarding the Biden First-Time Home Buyer Mortgage Relief Credit to its own article; Updated citations; Changed title and summary.
  • March 7, 2024: Rewrote content sections to include President Biden's State of the Union speech from March 7, 2024; Added new video.
  • January 28, 2024: Added additional language regarding bill status in Congress; Combined several sections for easier reading.
  • June 14, 2021: Original publish date

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       The First-Time Homebuyer Act of 2024 is a new bill that gives first-time home buyers up to $15,000 in federal tax credits paid as cash or claimed for down payment assistance at closing.

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