While first time homebuyer tax credits don’t currently exist, that could change soon.
President Joe Biden is proposing a $10,000 credit for first time homebuyers and an equal credit for individuals selling starter homes — the credits will aid ~3.5 million first time homebuyers and ~3 million sellers.
The proposed credit would provide first time homebuyers with an annual tax credit of $5,000 a year for two years, which is the equivalent of cutting interest rates by more than 1.5% on the median-priced home.
These measures, subject to congressional approval, seek to alleviate the stagnation in the housing market, where soaring mortgage rates and escalating prices have made homeownership inaccessible for many prospective buyers.
U.S. Treasury Secretary Janet Yellen said Biden wanted to make sure that middle-class families could afford to buy homes.
“He’s also proposing steps to expand the supply of housing,” Yellen said.
“And I believe they would be very helpful: investing in refurbishment of properties, expanding the low-income housing tax credit that will be helpful to Americans dealing with the shortage of affordable housing.”
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Biden Administration Wants to Lower the Costs of Homeownership
For many Americans, owning a home is the cornerstone of raising a family, building wealth, and joining the middle class.
Too many working families feel locked out of homeownership and are unable to compete with investors for a limited supply of affordable for-sale homes.
President Biden is calling on Congress to enact legislation to enable more Americans to purchase a home, including:
First Time Homebuyer Tax Credit: $10,000 Mortgage Relief Credit ($5,000 Per Year for Two Years)
Here’s how the $10,000 credit would work for buyers and sellers:
- President Biden is calling on Congress to pass a mortgage relief credit that would provide middle-class first time homebuyers with a tax credit of $10,000, ($5,000 a year for two years).
- A one-year tax credit of up to $10,000 to current homeowners who sell their starter homes.
- This is the equivalent of reducing the mortgage rate by more than 1.5 percentage points for two years on the median home, and will help more than 3.5 million middle-class families purchase their first home over the next two years.
- The President’s plan also calls for a new credit to unlock inventory of affordable starter homes, while helping middle-class families move up the housing ladder and empty nesters right size.
- Many homeowners have lower rates on their mortgages than current rates.
- This “lock-in” effect makes homeowners more reluctant to sell and give up that low rate, even in circumstances where their current homes no longer fit their household needs.
- The President is calling on Congress to provide a one-year tax credit of up to $10,000 to middle-class families who sell their starter home, defined as homes below the area median home price in the county, to another owner-occupant.
- This proposal is estimated to help nearly 3 million families.
Down Payment Assistance for First Generation Homeowners
Here’s how the $25,000 first generation homeowners down payment assistance would work:
- President Biden continues to call on Congress to provide up to $25,000 in down payment assistance to first generation homebuyers whose families haven’t benefited from the generational wealth building associated with homeownership.
- This proposal is estimated to help 400,000 families purchase their first home.
What is the Effective Date of Biden’s Mortgage Relief Tax Credits?
At this time, the effective date of these mortgage relief credits is unknown.
The White House wants to see Congress pass legislation to enact the tax credits this year, which would allow homebuyers and homeowners to receive the tax credits starting in the 2024 tax year.
Homebuyers would receive the credit for a two-year period that they could claim on their tax returns starting with either the 2024 or 2025 tax year, a Biden official stated.
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About the Author
Brian Reese is a senior advisor and co-owner at District Lending. He is one of the world’s leading experts in veteran benefits, having helped millions of veterans secure their financial future since 2013. Brian is the founder VA Claims Insider, an education-based Coaching & Consulting company whose mission is to educate and empower veterans to get the VA disability benefits they’ve earned for their honorable service. A former active-duty air force officer, Brian deployed to Afghanistan in support of Operation Enduring Freedom. He is a distinguished graduate of management of the United States Air Force Academy and earned his MBA as a National Honor Scholar from the Spears School of Business at Oklahoma State University.
