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

On April 28, 2021, U.S. lawmakers introduced the First-Time Homebuyer Act. The bill revises the IRS tax code to grant first-time home buyers up to $15,000 in refundable federal tax credits.

The First-Time Homebuyer Tax Credit and the First-Time Homebuyer Act both refer to the same thing. We’ll be referring to them in this post interchangeably.

The First-Time Homebuyer Act aims to help low- and middle-income Americans attain homeownership. As of today, this bill has yet to become a law.

We’ll explain what the $15,000 First-Time Homebuyer Tax Credit can do if it becomes a law, what you’d need to be eligible, and how it’s different from similar programs.

What is the Current Status?

As of April 1, 2023, the First-Time Homebuyer Tax Credit is still a bill and has not yet been passed into law.

Check out the current status of all of the proposed government programs for first-time home buyers.

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

The First-Time Homebuyer Tax Credit is the First-Time Homebuyer Act and it offers a $15,000 tax credit to first-time home buyers that meet specific requirements.

The bill introduces wealth-building opportunities for historically marginalized communities and fulfills one of President Biden’s key campaign promises – to make homeownership more accessible to the millions of renters who seek it for themselves and their families.

According to the bill, home buyers who meet the following criteria receive the credit:

• Must be a first-time home buyer
• Must not have not owned a home in the last 36 months
• Must not exceed income limitations for the area
• Must be purchasing a primary residence – no second homes or rental properties
• Must be at least 18 years of age, or married to a person who is 18 years of age
• Must be purchasing the home from a non-relative

Get pre-approved to check your eligibility.

How Does the First-Time Homebuyer Act Work?

The First-Time Homebuyer Act or $15,000 First-Time Homebuyer Tax Credit is not a loan to be repaid, and it’s not a cash grant like the Downpayment Toward Equity Act.

The tax credit is equal to 10% of your home’s purchase price and may not exceed $15,000 in 2021 inflation-adjusted dollars.

Assuming a 5 percent inflation rate for 2021 and 2022, the maximum first-time home buyer tax credit would increase as follows 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’s applied to your federal tax bill, or refund, directly.

Married households who file their taxes separately may claim half of the available credit, non-married buyers may claim their proportional share of the credit. At no time may the first-time home buyer tax credit exceed the maximum allowable amount by law.

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

If passed into law, eligible first-time home buyers would automatically receive their tax credit, with no action needed beyond the filing of a tax form. And, for homeowners whose tax bill is less than $15,000, the extra amount would be paid via direct deposit.

The program applies to all homes purchased beginning January 1, 2021. There is no end date specified, and the $15,000 tax credit could become permanent.

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

As of today, eligible home buyers who meet all of the following requirements would receive the tax credit from the First-Time Homebuyer Act:

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. This includes primary residences, second homes, and vacation rentals.

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

Eligible home buyers may use the tax credit only once. If you use the tax credit to buy a home in 2021, for example, you may not use it again 2026.

Must earn a modest income based on location and household size

Eligible home buyers must earn an income that’s no more than 60 percent above the median income for the area. For example, in Columbus, Ohio where the median income is $60,000, home buyers who file their taxes as a single-earner may not have a household income of more than $96,000 per year.

Higher income levels are permitted for households with multiple income earners, including married and non-married joint-filers.

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 who is 18 years of age. This rule prevents adults from buying a home with cash in the name of a child, then claiming the tax credit on the child’s income tax returns.

Must be purchasing the home from a non-relative

Eligible home buyers may not purchase their home from a relative, including a spouse, parent, child, aunt, uncle, cousin, or grandparent. Note that the bill provides no specific guidance regarding the purchase of a home from an entity controlled by a relative, such as a trust.

Important: The First-Time Homebuyer Tax Credit of 2021 is still a bill, and the above terms of a bill can change by the time they become a law.

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How to Receive Your $15,000 Tax Credit

The First-Time Homebuyer Act text does not specify how to claim your tax credit.

However, the bill’s language is similar to another first-time buyer tax credit program – the First-Time Homebuyer Credit of 2009. That program required an additional IRS form to accompany the federal tax filing, and it’s expected that the 2021 version of the tax credit will do the same.

However, there’s one notable difference: the First-Time Homebuyer Act is retroactive to December 31, 2020, which means that home buyers can file an amended return for the prior year’s filing at any time, and receive an immediate cash payout from the U.S. Treasury.

Consult your tax accountant for details.

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

The First-Time Homebuyer Act is designed for low- and middle-income households, and meant to build long-term wealth through real estate. It isn’t geared toward house-flippers or real estate investors.

Therefore, buyers who use the home buyer tax credit and change their primary residence or sell within four years of purchase will realize a tax liability based on how long they held their home.

• 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

There are exceptions to the repayment rule.

One exception states that home buyers who sell their home within four years to a non-relative, and 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, and 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.

There are other exceptions, too, including exceptions for death, divorce, and certain military transfers.

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 has precedent which makes it the most likely first-time buyer program to pass Congress. The bill for first-time buyers  is modeled on the $8,000 First-Time Home Buyer Tax Credit from the 2008 Housing and Economic Recovery Act.

The first-time home buyer tax credit is automatically for eligible home buyers.

Get pre-approved for a mortgage.

What Does the Downpayment Toward Equity Act Do?

The First-Time Homebuyer Tax Credit is different from another housing-related bill, the Downpayment Toward Equity Act, which was also introduced this year. The Downpayment Toward Equity Act proposes to pay $25,000 cash to eligible home buyers to offset closing costs, taxes, and interest.

Together, the two bills create a forty-thousand dollar incentive for renters who want to buy their first home.

Check your eligibility for the $25,000 grant.

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

If you have a question and it doesn’t appear here, use the chat box and we’ll answer you live. We’ll then add your question to this FAQ because if you’re asking a question, we know that  other readers have the same question, too.

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 unavailable as of today. The program is currently a congressional bill. It may pass into law within a few weeks, a few months, or possibly never. We expect the bill to pass into law in some form before the end of the year. Homebuyer publishes a special newsletter on the topic. Register below.

The first step in the process is getting pre-approved.

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 – the credit is earned automatically. If you meet the program’s eligibility requirements, the IRS will credit your tax bill for the amount you’ve earned.

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

Yes, if you move or sell your home within four years using the program, you’re required to 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 first-time home buyer 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 would be reduced by 50% and the first-time home buyer could claim $7,500 on its 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 can be applied to any home that’s zoned for residential property. This includes trailer homes, mobile homes, and manufactured homes.

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

No, the $15,000 First-Time Homebuyer Act of 2021 is different from the $25,000 program. The $25,000 program for first-time home buyers is the Downpayment Toward Equity Act of 2021. Home buyers can potentially qualify for both programs and collect $40,000.

There is also the LIFT Act, which was introduced in Sept. 22, 2021. This helps first-time buyers pay off their home quicker with ultra-low mortgage rates.

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. If your household income is less than or equal to the product, your income is eligible.

Get pre-approved to confirm your household income.

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

Yes, the First-Time Homebuyer Act of 2021 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.

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 2-unit, 3-unit, or 4-unit home so long as one of the units is your primary residence.

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

The American Dream Downpayment Act is a program going through Congress that sets up tax-advantaged savings accounts to use towards down payment costs.

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