The Biden $10,000 First-Time Home Buyer Mortgage Relief Credit

The $10,000 First-Time Home Buyer Mortgage Relief Credit is a housing bill introduced by President Biden in his State of the Union Address on March 7, 2024.

The proposed bill, which gives first-time home buyers $10,000 in tax credits in two $5,000 annual installments, is proposed as a mortgage relief credit to Americans.

At today’s mortgage rates, the $10,000 tax credit has the same effect as a mortgage company giving home buyers a 150 basis point discount off their mortgage rate.

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Introduced In Biden State Of The Union Speech: March 2024

The $10,000 First-Time Home Buyer Mortgage Relief Credit

The $10,000 First-Time Home Buyer Mortgage Relief Credit program is mortgage relief for low- and middle-income households. The program gives eligible buyers $5,000 a year in tax credits for their first two years of homeownership.

Tax credit money can be used for any purpose.

The $10,000 tax credit program is expected to resemble the $15,000 First-Time Homebuyer Act introduced in 2021, based on the successful Obama-era $8,000 tax credit for first-time buyers.

To qualify for the proposed program, home buyers must meet the following eligibility standards:

1. Must meet the definition of first-time home buyer
2. Must not be a prior recipient of a first-time home buyer tax credit
3. Must not earn more than 60% above than the area’s median income
4. Must be making an arms-length transaction
5. Must be at least 18 years old

The Biden $10,000 mortgage relief tax credit is expected to help 3 million first-time home buyers. Here’s how:

The program provides tax credits of up to $5,000 annually, which offsets the monthly PITI on a home.

If Your Current Mortgage Interest Rate Is…	You’ll Pay $ ____ In Years 1 and 2 for a $200,000 mortgage	Which Makes Your Effective Interest Rate…
4.50%	$7,160	0.48%
4.75%	$7,520	0.82%
5.00%	$7,884	1.15%
5.25%	$8,253	1.47%
5.50%	$8,627	1.80%
5.75%	$9,006	2.11%
6.00%	$9,389	2.42%
6.25%	$9,777	2.73%
6.50%	$10,170	3.04%
6.75%	$10,566	3.34%
7.00%	$10,967	3.64%
7.25%	$11,372	3.94%
7.50%	$11,781	4.23%
7.75%	$12,194	4.52%
8.00%	$12,610	4.81%

Data: Homebuyer.com; Assumptions: $200,000 30-year fixed-rate mortgage

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The $10,000 Home Seller Tax Credit

President Biden’s State of the Union address also included a proposal that gives first-time home buyers and other occupying home buyers an advantage over real estate investors, including corporate home buyers.

The proposed Home Seller Tax Credit gives a one-time $10,000 tax credit to homeowners who sell their homes to future owner-occupants. Sellers who sell to their homes to real estate investors cannot claim the credit.

Sellers must also meet the following eligibility requirements to qualify:

• The home seller must live in the home they’re selling as their primary residence
• The home buyer must make the home their primary residence
• The home buyer must not earn more than 60% above the area median income

Furthermore, the home for sale must be a starter home, defined as a home that sells for less than the county’s median home price. Eligible property types include single-family homes, condominiums, townhomes, multi-unit homes, and any other home zoned for residential residence.

The bill will increase available housing inventory for homes selling between $100,000-250,000 which, according to the National Association of REALTORS® Existing Home Sales report, is the fastest-selling segment of U.S. homes.

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Biden: $10k Tax Credit For Home Buyers AND Sellers #SOTU

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Downpayment Assistance for First-Generation Home Buyers

President Biden also used his State of the Union speech to call on Congress to pass the Downpayment Toward Equity Act, a downpayment assistance program for first-generation home buyers that gives up to $25,000 in cash grants.

The bill was originally introduced in the 2021-2022 Congress, then re-introduced in 2023. It currently has 44 co-sponsors in the House of Representatives. A corresponding bill is expected to be introduced in the Senate soon.

Read our helpful review of the Downpayment Toward Equity Act for more information.

More Housing Assistance Programs

The President’s State of the Union speech acknowledged that, although Congress can lower housing and homeownership costs for first-time home buyers and address the shortage of affordable homes nationwide, work can be done beyond Capitol Hill as well.

For instance, the Federal Housing Administration lowered mortgage insurance premiums for all new FHA loans last year, saving homeowners an estimated $800 annually. Despite the reduction, the FHA’s cash reserves expanded and the FHA now holds 5 times its required amount.

The FHA can take a second action and reduce its mortgage insurance rates in 2024 to help keep homes affordable.

As another example, President Biden called on the Federal Home Loan Banks to double their annual contribution to the Affordable Housing Program, which, in part, makes first-time home buyer grants and other home-buying programs possible.

The President also called on mortgage lenders and title companies to reduce fees that raise the cost of homeownership and homeownership opportunities, including anti-competitive insurance policies that cut into a home buyer’s down payment size and reduce their available equity.

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The 2024 Biden $10,000 First-Time Home Buyer Tax Credit

$10,000 First-Time Homebuyer Mortgage Tax Credit Eligibility

Until the $10,000 First-Time Home Buyer Mortgage Relief Tax Credit is drafted into a bill, we can make educated guesses on program requirements based on similar first-time home buyer bills with Congress, including the $15,000 Homebuyer Tax Credit Act and the 2009 Obama Tax Credit, which more than 2.6 million renters used to buy their first home. 

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 160 percent of the area’s median income. For example, in Columbus, Ohio, where the median income is $60,000, eligible home buyers who file as single earners must have a household income of less than $96,000 annually.

Households with multiple income earners have higher income limits.

4. 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.

5. 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.

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How Are $10,000 First-Time Homebuyer Tax Credits Paid?

The Biden program for first-time home buyers is a tax refund from the U.S. Treasury. It’s paid to eligible first-time home buyers when the IRS processes their federal taxes.

The credit is expected to be paid in two $5,000 installments in consecutive years so long as the homeowner continues to own the home and make it their primary residence.

It’s not yet known whether the bill’s tax credit will adjust for inflation.

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.

Buyers who change their primary residence or sell their home within four years of purchase may realize a tax liability for moving out.

When Will The $10,000 First-Time Homebuyer Tax Credit Pass?

The $10,000 First-Time Home Buyer Tax Credit is among the more likely first-time home buyer programs to pass into law for two reasons:

1. It modifies existing tax code from the 2009 Tax Credit
2. Affordable housing is a keystone of current White House policy

During 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. This First-Time Home Buyer Tax Credit bill meets all three criteria.

With congressional approval, the $10,000 first-time home buyer tax credit program will be available in 2024.

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Common Questions About The First-Time Homebuyer Act

Did the $10,000 First-Time Home Buyer Tax Credit pass into law?

As of April 29, 2024, the $10,000 First-Time Homebuyer Act is not passed.

Is the $10,000 Home Buyer Tax Credit available yet?

No, the $10,000 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.

How do I apply for the $10,000 Home Buyer Tax Credit?

Eligible first-time home buyers aren’t required to apply for the $10,000 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 $10,000 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 $10,000 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 $2,500 on their tax returns per year.

When I buy a home and use the $10,000 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 $10,000 first-time home buyer tax credit, the tax credit’s effective date is the date of closing.

Is the $10,000 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.

How do I know if my income is too high for the $10,000 first-time home buyer tax credit?

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 buy a multi-unit home and rent out the other units under the program?

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.

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.