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The DASH Act: $15,000 Tax Credit For First-Time Home Buyers
First-time home buyers may soon benefit from a new $15,000 tax credit, courtesy of the DASH Act.
The DASH Act is a congressional housing bill introduced in March 2023. It promotes safe and affordable housing and includes a $15,000 first-time home buyer tax credit.
The DASH Act’s official name is Senate Bill S.680.
This article reviews the critical elements of the DASH Act, including how it helps renters, cities, and communities; and how first-time home buyers can get a $15,000 tax credit while achieving their American Dream of homeownership.
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Introduction to the DASH Act (Senate Bill S.680)
The DASH Act, which stands for Decent, Affordable, Safe Housing for All, is a bill introduced by Senator Ron Wyden.
The bill creates home construction incentives, directs more funds to cities for zoning and improvements, and expands homeownership opportunities for first-time buyers. It benefits low- and moderate-income households, affordable housing builders, and state and local housing agencies.
There are more than twenty sections in the DASH Act. Here is a summary of its key components:
- $10 billion allocated for the Housing Trust Fund
- Tax breaks for building in Difficult Development Areas
- $65 million for state-level housing agencies
- $10 million for modular home studies
- $125 million for cities that loosen zoning laws
- Permanent grants for agencies that support the homeless
- Funding to build and preserve home supply for domestic farm laborers
- $250 million in rental assistance for rural, low-income Americans
- Tax exemptions for builders of affordable housing
- Permanent tax breaks for operating low-income housing
- Fewer tax loopholes on selling rent-controlled buildings
- Zoning protections for builders of affordable homes
- Tax breaks on buildings with supportive services for tenants
- Funding for studies to convert commercial buildings into homes
- Tax breaks for landlords who rent to low- and middle-income tenants
- $450 million in subsidies to build in low- and middle-income neighborhoods
For first-time home buyers, the most notable aspect of the DASH Act is its $15,000 refundable tax credit, which we discuss in more detail below.
The DASH Act $15,000 First-Time Homebuyer Tax Credit
The DASH Act includes a refundable first-time home buyer tax credit of up to $15,000.
Eligible first-time buyers receive credits against their tax bill equal to twenty percent of their home’s purchase price, up to a maximum credit of $15,000. If the DASH Act credit exceeds the buyer’s overall tax bill, the U.S. Treasury issues a refund check.
To claim the DASH Act’s tax credit, first-time buyers must meet eligibility requirements in four areas.
DASH Act Requirement #1: The Home Buyer
The DASH Act defines a “first-time home buyer” as someone who has never owned a home. This definition differs from how other first-time home buyer programs define first-time buyer, which reduces the number of DASH Act-eligible buyers.
In addition, DASH Act buyers must meet other qualifying standards, too.
- Must be at least 18 years of age
- May not be claimed as a dependent by another person
- Must be a U.S. citizen or a permanent resident alien
Note that the DASH Act does not require home buyers to be first-generation home buyers or members of a minority or protected class.
Low- and no-down payment mortgages are allowed.
DASH Act Requirement #2: The Home
To claim the full $15,000 tax credit offered by the DASH ACT, a first-time buyer must purchase a home meeting the bill’s requirements.
The first DASH Act home requirement is that the subject property becomes the buyer’s main residence within 60 days of closing. The tax credit applies in the year the buyer takes occupancy.
The second requirement is that the buyer purchases the home in an arms-length transaction. An arms-length transaction is a purchase where the buyer and seller are unrelated by marriage or family.
The third DASH Act home requirement is that the subject property sale price may not exceed local conforming mortgage loan limits by more than 10 percent.
In most parts of the country, the 2023 conforming loan limit is $726,200, which puts the DASH Act limit at $798,000. When buyers purchase homes above DASH Act limits, their federal tax credit reduces by $1,500 per $10,000 in the purchase price until the credit is no longer available.
Lastly, the DASH Act tax credit is limited to 20 percent of a home’s purchase price. Buyers who purchase homes for less than $75,0000 receive a smaller credit.
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DASH Act Requirement #3: Home Buyer Income
The DASH Act places income limits on home buyers based on the buyer’s federal tax filing status and their modified adjusted gross income.
Modified adjusted gross income is the sum of everything you earned – wages, tips, investment income, farm income, and more – minus certain tax-deductible expenses such as retirement plan contributions, student loan interest, and specific business expenses.
To get the DASH Act’s entire $15,000 first-time buyer tax credit, buyers and their modified adjusted gross income must meet the following eligibility requirements:
- Buyers who file as singles: $100,000 per year
- Buyers who file as singles with dependents: $150,000 per year
- Buyers who file jointly with a spouse: $200,000 per year
The DASH Act places additional restrictions, too, to prevent buyers from gaming the tax credit.
People claimed as a dependent on another person’s tax returns cannot get the $15,000 DASH Act tax credit, and married persons who file separately from their spouse cannot get the DASH Act credit. Buyers who earn a modified adjusted gross income up to fifty-thousand dollars above DASH Act limits receive a reduced federal tax credit that gradually phases out as income levels rise.
Consult with your accountant for questions about your income and tax filing status.
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DASH Act Requirement #4: Home Buyer Occupancy
The DASH Act first-time home buyer tax credit requires buyers to make their home a primary residence within 60 days of purchase. Buyers who purchase second homes, vacation homes, and short- and long-term rental properties are ineligible for the DASH Act tax credit.
Furthermore, buyers who change their primary residence within five tax years of purchase are subject to a pro-rata recapture, payable to the IRS.
The DASH Act repayment schedule is as follows:
- Move before December 31 of next year: Repay 100%
- Move before December 31 of Year 2: Repay 80%
- Move before December 31 of Year 3: Repay 60%
- Move before December 31 of Year 4: Repay 40%
- Move before December 31 of Year 5: Repay 20%
The DASH Act allows for exceptions to the 5-year rule for homeowners who face unforeseen and severe circumstances.
Some of the DASH Act repayment exceptions include the following:
- Death of the homeowner or their spouse
- Relocation for military duty
- Job loss or job-related relocation
- Illness that results in the inability to work or maintain employment
DASH Act recipients may appeal any recapture requests with the Internal Revenue Service.
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How To Apply For The DASH Act $15,000 Tax Credit
The DASH Act $15,000 first-time home buyer tax credit is automatic. There is no application required.
There are also no financing restrictions. Buyers can claim the DASH Act tax credit whether paying cash for a home or financing with a mortgage, including:
When eligible buyers purchase their first home, they should submit an attestation with that year’s tax filing including the settlement statement from the purchase or a closing disclosure from their mortgage company.
The DASH Act tax credit adjusts annually with inflation, rounded to the nearest thousand. Therefore, if inflation is 5 percent in the program’s first year, the maximum DASH Act tax credit rises to $16,000.
The IRS maintains the official DASH Act records for home buyers.
The DASH Act: Questions Home Buyers Are Asking Us
Homebuyer.com fields questions from our customers, readers, and YouTube channel subscribers. Here are some of the questions other first-time home buyers ask us about the DASH Act:
Can I use the DASH Act tax credit for a new construction home?
Yes, first-time buyers can claim the DASH Act tax credit for purchasing a new construction home.
What is different about how the DASH Act defines “first-time home buyer”?
The DASH Act defines a first-time home buyer as someone who has never owned a home. Other first-time buyer programs define a first-time buyer as someone who hasn’t owned a home in the last 36 months.
Can I combine the DASH Act tax credit with other first-time home buyer programs?
Yes, the DASH Act is a tax credit that buyers can combine with other first-time home buyer grants, including the $25,000 grant for first-time buyers and any local or municipal cash grant programs.
What will my DASH Act tax credit be if I buy a $60,000 home?
The DASH Act tax credit is limited to 20 percent of a home’s purchase price. Hence, buyers of $60,000 homes receive a maximum $12,0000 federal tax credit.
Can I claim the DASH Act tax credit if I pay cash for house?
Yes, the DASH Act is a bill to help first-time home buyers. There are no restrictions on how buyers finance a home. Cash buyers are allowed.
Will the DASH Act pass into law before The HELPER Act?
The HELPER Act, which is officially titled “Homes for Every Local Protector, Educator, and Responder Act”, is a no-money-down, no mortgage insurance program for teachers, law enforcement officials, and firefighters. We expect the HELPER Act to pass into law as early as mid-2023.
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