What Is the First-Time Homebuyer's Credit?

Tax breaks can help first-time homebuyers save money

Young couple in empty kitchen of new house

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The federal first-time homebuyer tax credit was a tax break offered to eligible individuals and couples who purchased a home between April 8, 2008, and May 1, 2010. This tax credit was introduced as part of an economic recovery initiative launched by the Obama administration following the financial crisis of 2007 to 2009.

While this program is no longer available, you may still qualify for a state tax credit to buy a first home, depending on where you live. The Biden administration has also proposed a new homebuyer tax credit that could make purchasing a home easier in the future.

Key Takeaways

  • The first-time homebuyer tax credit was passed as part of the 2008 Housing and Economic Recovery Act to help stimulate economic growth.
  • It was worth 10% of the home's purchase price, up to certain limits.
  • First-time homebuyers may still qualify for tax credits from their state government, as well as assistance with a down payment or closing costs.

What Was the First-Time Homebuyer Credit?

The first-time homebuyer credit was introduced as part of the 2008 Housing and Economic Recovery Act. HERA was a comprehensive piece of legislation designed to spur economic growth in the wake of the financial crisis. The tax credit was meant to encourage consumers to purchase homes, which would, in turn, help to stimulate the economy.

The homebuyer tax credit was extended to eligible individuals and couples. The credit for homebuyers was worth 10% of the home's purchase price. Its maximum upper limit depended on when you bought the home.

Here are three examples of what the credit was worth in each year it was offered. If you bought a home:

  • In 2008, your credit would have been worth $7,500.
  • From 2009 to early 2010, your maximum credit would have been $8,000.
  • As a replacement for a previous house between November 7, 2009, and May 1, 2010, your maximum credit would have been $6,500.

If you qualified for the 2008 credit, it was treated as an interest-free loan. The IRS required those homebuyers to repay the credit over a 15-year period through an individual federal income tax increase. The credit did not have to be repaid by those who purchased homes in 2009 and 2010, with some exceptions. The 2008 and 2009 credits were only available to people who hadn't owned a home in the prior three years.


Though it may seem straightforward, a "first-time homebuyer" has a special definition with the IRS. To claim the credit, you (and your spouse, if married) must not have owned any other principal residence for three years before buying the new house. The credit also has limits surrounding residency, income, and citizenship status.

Criticism of the First-Time Homebuyer's Credit

First-time homebuyer credits are an excellent way to help people buy their first home, but the programs have not always offered equitable homeownership opportunities to people who are marginalized. Systemic racism in mortgage underwriting has contributed to considerable disparities in homeownership rates between Black and White households. These disparities lower the chances of potential Black homeowners getting a mortgage approval and first-time homebuyer credit.

Will the First-Time Homebuyer Credit Be Reinstated?

In April 2021, Representative Earl Blumenauer introduced a bill to support first-time homebuyers with a tax credit of up to $15,000. Much like the original version, it aimed to make homeownership more affordable for low-and middle-income families. The bill also specifically addressed discriminatory housing policies. For a year, the bill remained in the House Committee on Ways and Means without any action, and as of May 2022, its status is still pending.

State Tax Credits for First-Time Homebuyers

Since the original federal first-time homebuyer credit has expired and legislation to reinstate it remains stalled in Congress, first-time homebuyers shouldn't rely on a federal tax credit in the near future. If you're planning to buy a home now, though, you may be able to get tax breaks or other benefits at the state level. The types of assistance you may benefit from can include:

For example, Idaho offers its residents a mortgage credit certificate. This allows homebuyers to claim a federal tax credit of up to 35% of mortgage interest paid annually, up to $2,000 per year. First-time homebuyers who meet income limits and other requirements may be able to take advantage of this program to save on mortgage interest costs. Other states offer similar programs.

In New York City, the HomeFirst Down Payment Assistance Program offers up to $100,000 toward a down payment or closing costs for eligible homebuyers. You must be a first-time homebuyer to qualify and must be within maximum income limits for your household size. Qualifying for a down-payment grant in the state could remove a significant obstacle to buying a home.

New Jersey offers a down payment assistance program that provides up to $10,000 in interest-free forgivable funding to eligible first-time homebuyers. This money can be used toward a down payment or your closing costs. You have to buy a home in New Jersey and use an approved mortgage lender to qualify.

Your state's housing authority should have information on whether you are eligible for tax credits, down payment assistance, or other help for first-time homebuyers.


Some down-payment and closing-cost assistance programs require you to live in a home for a certain number of years. If you move before you reach that number, you might have to repay any money you receive.

Other Tax Advantages for Homebuyers

Besides getting some tax benefits upfront when you buy a home, once you're officially a homeowner, you can also take advantage of federal tax deductions. Deductions are helpful because they reduce your taxable income for the year.

The mortgage interest deduction, for example, allows you to deduct the interest paid on eligible mortgage loans. You can deduct interest on the first $750,000 in mortgage debt for homes purchased after December 15, 2017. The IRS cuts that amount in half if you're married but file joint tax returns.

The property tax you pay on a home you own is also tax-deductible under the state and local tax (SALT) deduction rules. The total amount of state and local taxes you can deduct (including property taxes) is capped at $10,000, but proposed legislation may remove that limit.

If you purchase a property from the Federal National Mortgage Association (FNMA), you may be eligible for the HomePath ReadyBuyer program. This program is intended to help first-time buyers buy and fix up homes that have been foreclosed. You could receive up to 3% in closing cost assistance after you complete an online homebuying education course.


You have to itemize your taxes to claim mortgage interest or SALT deductions. Be sure to compare the tax benefits with what you might get from claiming the standard deduction instead.

The Bottom Line

Buying a home can be stressful, but tax incentives and homebuyer assistance programs can make the process easier. While no first-time homebuyer tax credit currently exists at the federal level, one may be on the horizon again. In the meantime, it's worth looking into what's available at the state level to help make buying a first home an achievable goal.

Frequently Asked Questions (FAQs)

Is there a new tax credit for first-time homebuyers?

The Biden administration and several members of Congress have proposed different versions of a new tax credit for first-time homebuyers. As of May 2022, however, none of them has been passed into law.

Can I still get the tax credit for first-time homebuyers?

Unfortunately, this tax credit expired in 2010. If you purchased a home after May 1, 2010, you can't get a federal tax credit as a first-time homebuyer.

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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. IRS. "First-Time Homebuyer Credit Questions and Answers: Basic Information."

  2. U.S. Congress. "H.R.3221 - Housing and Economic Recovery Act of 2008."

  3. IRS. "Tax Credits for Homebuyers."

  4. Urban Institute. "Closing the Homeownership Gap Will Require Rooting Systemic Racism Out of Mortgage Underwriting."

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

  6. U.S. Congressman Earl Blumenauer. "Amidst Unprecedented Housing Demand, Blumenauer Introduces Legislation To Support First-Time Homebuyers."

  7. Idaho Housing and Finance Association. "Homebuyer Tax Credit (MCC)."

  8. NYC Housing Preservation and Development. "HomeFirst Downpayment Assistance Program."

  9. The Road Home New Jersey. "NJHMFA's Down Payment Assistance Program."

  10. IRS. "Publication 936, Home Mortgage Interest Deduction."

  11. Tax Foundation. "Who Benefits From the State and Local Tax Deduction?"

  12. HomePath by Fannie Mae. "Homebuyers: Terms and Conditions."

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