What Is the First-Time Homebuyer Act of 2021?

The First-Time Homebuyer Act of 2021 Explained in Less Than 5 Minutes

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Definition
The First-Time Homebuyer Act of 2021 is a bill that, if passed, will provide first-time homebuyers with a federal tax credit of up to $15,000. Additionally, the bill stipulates that homebuyers must meet income criteria and buy a home that meets purchase-price limits.
Couple buying their first home
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The First-Time Homebuyer Act of 2021 is a bill that, if passed, will provide first-time homebuyers with a federal tax credit of up to $15,000. Additionally, the bill stipulates that homebuyers must meet income criteria and buy a home that meets purchase-price limits.

The First-Time Homebuyer Act of 2021 awaits legislative approval. It’s important to learn why this bill is important and how it can reduce your tax bill if you’re a first-time homebuyer.

Definition and Example of the First-Time Homebuyer Act of 2021

The First-Time Homebuyer Act of 2021, sponsored by U.S. Representative Earl Blumenauer (D-OR) and several others, aims to establish a new refundable tax credit for first-time homebuyers. The tax credit is worth up to 10% of the home’s purchase price, to a maximum of $15,000.

For instance, if you were a first-time homebuyer and met the rest of the criteria for the tax credit, you’d be able to claim up to $15,000 of the home’s purchase price as a deduction on your taxes. This lowers the amount of taxable income you have to report, which lowers your taxes for that tax year.

Note

While Congressman Blumenauer introduced the bill to the Ways and Means Committee in April 2021, it has not passed in the House or Senate. As of March 2022, the tax credit does not yet exist.

How Does the First-Time Homebuyer Act of 2021 Work?

In recent years, first-time homebuyer tax credits have proved very successful. The Housing and Economic Recovery Act of 2008 provided up to an $8,000 tax credit for first-time homebuyers and was claimed by close to 1.5 million purchasers, according to Congressman Blumenauer.

The First-Time Homebuyers Act of 2021 intends to help low- and middle-income households purchase homes. According to the bill, individuals and married people who file jointly can qualify for up to a $15,000 tax credit. Unmarried individuals who purchase a home together can split the credit, and married couples filing separately receive a $7,500 credit each.

To qualify for the proposed credit, your modified adjusted gross income can’t exceed 160% of the median income in the area where the property is located. The purchase price of the home can’t exceed 110% of the area’s median home purchase price.

For example, if your city has a median income of $50,000, you could qualify for the tax credit if you have a modified adjusted gross income of up to $80,000. If your city has a median home price of $150,000, you could qualify for the credit when purchasing a home priced up to $165,000. You’d then be able to claim $15,000 on this home.

The credit is a refundable tax credit, which means that the credit you receive from the purchase offsets the amount of taxes you owe. For example, if you owed $3,500 in taxes but received a $10,000 credit from a home purchase, you’d get a refund of $6,500 when you filed your taxes.

Note

The proposed legislation has not been approved and is subject to change during the legislative process.

Who Qualifies for the First-Time Homebuyer Act?

First-time homebuyers with incomes below 160% of their area’s median income qualify. Qualified homes must have a purchase price at or below 110% of an area’s median sales price. There are other requirements as well, such as being over the age of 18. As the bill is currently written, to receive the credit, first-time home-buyers also:

  • Must not have any homeownership interest in the three years previous to the purchase
  • Must not have already used the credit in another tax year
  • Can’t claim a home that was acquired from a relative
  • Can’t have the property’s basis determined from the previous owner’s basis
  • Can’t sell the property or not use it as a primary residence during the tax year they are claiming
  • Can’t claim the credit if another taxpayer is claiming it for the same tax year
  • Will not be approved for the credit if an official copy of the settlement statement is not included with the filing

Key Takeaways

  • If passed, the First-Time Homebuyer Act of 2021 will offer first-time homebuyers a tax credit of up to $15,000.
  • The bill stipulates that homebuyers must meet income and home purchase-price limits.
  • To qualify, you’ll need to be 18 years or older and not have an ownership interest in a home in the last three years.
  • Homes acquired from a relative are not qualified for the First-Time Homebuyers’ tax credit.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Congressman Earl Blumenauer. "Amidst Unprecedented Housing Demand, Blumenauer Introduces Legislation to Support First-Time Homebuyers."

  2. Democratic Policy Committee. "H.R. 3221, the Housing and Economic Recovery Act of 2008."

  3. Congress.gov. "H.R.2863 - First-Time Homebuyer Act of 2021."

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