The First-Time Homebuyer Act of 2021: Explained

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The First-Time Homebuyer Act of 2021 would have given prospective buyers in 2021 or later a substantial gift: up to $15,000 in tax credits to make homeownership more affordable.

Unfortunately, the bill hasn’t passed and doesn’t seem to be a priority among lawmakers. But if you’re curious about how it could help you if Congress ever revives it, here are all the details of what it offers and who qualifies.

In this post:

What is the First-Time Homebuyer Act of 2021?

If it had become law, the First-Time Homebuyer Act of 2021 would have provided a first-time homebuyer tax credit of up to $15,000 for eligible homebuyers. Democratic Representative Earl Blumenauer of Oregon introduced the bill to the House on April 28, 2021.

Blumenauer wanted to amend the Internal Revenue Code so that buyers purchasing a primary residence could get a tax credit equal to 10% of the home’s purchase price or $15,000, whichever was higher.

Taxpayers who were married but filing separately would have been limited to a $7,500 credit. However, unmarried taxpayers buying a home together could have claimed the full $15,000 credit among themselves. The credit would have been adjusted for inflation after 2021.

Good to know: To be eligible, buyers would have needed to meet income qualifications based on their household size and the home’s location. Specifically, the buyer’s modified adjusted gross income could not exceed 160% of the area median income (AMI).

The national median family income in 2021 was about $80,000, so 160% of that would have been $128,000.

Additionally, homebuyers would only have been eligible for the full credit when purchasing a home whose price was in line with the area median purchase price.

Learn More: Get a Home Loan: Compare Today’s Best Lenders

What is the current status of the First-Time Homebuyer Act?

Officially, nothing has happened with the First-Time Homebuyer Act of 2021 since the day it was introduced and referred to the House Committee on Ways and Means. This outcome isn’t unusual. It’s common for a bill to get introduced in Congress, then languish. It’s unlikely that the act will become law.

Who qualifies as a first-time homebuyer?

To qualify as a first-time homebuyer, you must have never owned a home or not owned a home in the three years prior to the new home’s date of purchase.

You also would have had to meet these requirements to qualify for the tax credit:

  • The seller could not be related to you or your spouse
  • You couldn’t have previously used the tax credit
  • You could not have sold the house in the same year you bought it

If you sold the home within four years, you would have had to repay part of the credit. For example, if you had claimed the full $15,000 credit but sold your home after two years, you would have had to repay $7,500 of the credit.

But there are a few exceptions to this rule. You wouldn’t have had to repay the credit if you sold your home or stopped using it as your main residence for one of these reasons:

  • Your heirs had to sell your home because you died
  • You got divorced and sold your share of the home to your spouse
  • You or your spouse got orders for military service
  • You or your spouse got orders for extended duty government service
  • Your home was destroyed, seized, or condemned
  • You had to move at least 50 miles for work

How to get the $15K first-time homebuyer tax credit

It’s not currently possible to get the $15,000 first-time homebuyer tax credit. This is because the act has stalled in Congress and has yet to be passed into law.

If this act were to become law, you’d need to fill out an additional tax form to claim it when you filed your annual federal tax return.

What other benefits are available to first-time homebuyers?

The best benefits available to first-time homebuyer programs are down payment and closing cost assistance programs. These programs offer grants that don’t have to be repaid or small second mortgages with low rates and favorable terms. The intention is to make homeownership more affordable by offering assistance to cover some or all of the up-front and closing costs associated with buying a home.

These programs often go hand-in-hand with mortgages like Federal Housing Administration (FHA) loans and Fannie Mae Housing Finance Agencies (HFA) Preferred loans. These loans are designed for borrowers who may not qualify for a standard conventional loan.

First-time homebuyer assistance is available from state and local entities such as California’s Housing Finance Agency and Texas’s Department of Housing and Community Affairs. To qualify, you’ll likely have to meet certain income limits depending on where you live.

Additionally, federal tax law has long offered a number of homeowner deductions for mortgage interest, mortgage points (which are considered prepaid interest), and real estate taxes.

Here are five tax deductions homeowners can currently take advantage of:

Homeowner deduction What it does
Mortgage points deduction Reduces your liability based on points actually paid to the lender
Mortgage insurance deduction Reduces your liability based on your PMI payments
Mortgage interest deduction Reduces your liability based on how much mortgage interest you’ve paid — cap on how much you can deduct
Home office deduction Reduces your liability based on the cost of using a portion of your home exclusively for business purposes
Real estate tax deduction Reduces your liability based on how much you’ve paid in property taxes — cap on how much you can deduct

See: The Tax Benefits of Owning a Home: Must-Know Deductions and Credits

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About the author
Amy Fontinelle
Amy Fontinelle

Amy Fontinelle has been a personal finance writer since 2006. Her work has been published by Forbes Advisor, Capital One, MassMutual, Prudential, Reader’s Digest, The Motley Fool, Investopedia, International Business Times, Business Insider, Bankrate, and other outlets.

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