First Time Home buyer tax Credit: 

First Time Home buyer tax Credit

Key Points:

• Have not owned a home or co-signed a mortgage in the past three years.
• Are a single parent who co-owned a property solely with a former spouse during marriage.
• Are a displaced homemaker who owned a home only with a spouse.
• Have owned only a home that is not permanently affixed to a foundation.
• Have owned only a home that does not meet state or local building codes and cannot be brought into compliance for less than the cost of building a permanent structure.

According to the U.S. Department of Housing and Urban Development (HUD), you may be eligible as a first-time homebuyer if you meet the following conditions.

Tax credits offer a more significant incentive compared to deductions. While deductions reduce taxable income, credits directly lower the amount of tax owed. For instance, if you owe $10,000 in federal taxes and receive a $1,000 tax credit, your tax bill would decrease to $9,000

What is first time home buyer tax Credit?

The first time home buyer tax credits serve as governmental tools to provide financial rewards to taxpayers for specific actions. They work by directly decreasing the amount of tax owed when filing a tax return. So, what exactly is a first-time homebuyer tax credit? Well, it’s essentially a tax incentive designed to provide this type of tax relief to individuals who are purchasing a home for the first time.

First time home buyer tax credit eligibilty:

• First-Time Homebuyer Status: Must not have owned a home or co-signed on a mortgage within the past three years. Applies to both primary residences and second homes.
• Non-Usage of Tax Credit Previously: Can only utilize the tax credit once. However, those who used the 2008 first-time homebuyer tax credit are still eligible.
• Income Requirements: Income should not exceed 160 percent of the median income for the area where the property is located.
• Age Requirement: Must be at least 18 years old by the purchase date of the property or married to someone meeting this age requirement.
• Prohibition on Purchasing from Relatives: Not permitted to purchase a home directly from a relative, including spouses, parents, children, aunts, uncles, cousins, or grandparents.

Adhering to these eligibility criteria is essential for individuals aiming to qualify for the first-time homebuyer tax credit in 2024 and reap its benefits.

First-Time Homebuyer Tax Credit income limits:

Income Limits: Initially, the program set income thresholds for eligibility. Individual homebuyers were required to have a modified adjusted gross income (MAGI) between $75,000 and $95,000, while married couples filing jointly had a cap of $150,000.

Income Threshold Adjustments: These income limits were periodically adjusted. By 2010, the income threshold for individuals had been raised to $125,000, and for married couples filing jointly, it was increased to $225,000.

Filing Form 5405: To claim the first-time homebuyer tax credit, eligible individuals had to complete the IRS Form 5405, titled “First-Time Homebuyer Credit and Repayment of the Credit.” This form facilitated the process of claiming the credit and managing any necessary repayments.

First time home buyer tax credit deduction

here is some of cost that can be deducted after buying a Home:

1. Property Taxes: You can subtract property taxes you paid, but only up to $10,000, when you file your federal taxes.
2. Mortgage Interest: You can subtract the interest you pay on your mortgage, but only on the first $750,000 you borrowed. If you’re married and filing separately, the limit is $375,000.
3. Loan Origination Fees/Mortgage Points: Before 2022, you could deduct upfront fees like loan origination fees or mortgage points if you paid them before December 31, 2021, and met certain requirements.

---

What is first time home buyer Act?

The First-Time Homebuyer Act, also referred to as H.R. 2863, proposes to provide first-time homebuyers with up to $15,000 in refundable federal tax credits.

The U.S. federal government provided a tax credit program for first-time homebuyers, including those who hadn’t owned a home. This proposes to provide first-time homebuyers with up to $15,000 in refundable federal tax credits.

First-Time Homebuyer Act’s key points:

• Purpose: The First-Time Homebuyer Act of 2021, still under consideration in the House of Representatives as of November 2023, aims to assist low- and middle-income Americans in purchasing property by reintroducing the tax credit program that was in effect from 2008 to 2010.
• Tax Credit Details: Under the proposed bill, eligible homebuyers could receive a tax credit equal to 10 percent of their home’s purchase price, up to a maximum of $15,000. The purchase price limits would be determined based on area median values.
• Potential Impact: If the First-Time Homebuyer Act of 2021 is enacted into law, many low- and middle-income Americans would qualify for a tax credit when purchasing a house. Additionally, under the proposed legislation, the tax credit may not need to be repaid unless the home is sold within the first four years of ownership.

---

Is $15,000 First Time Home Buyer Tax Credit by the Biden Administration?

The $15,000 First-Time Home Buyer Tax Credit is likely to become law, drawing on the success of previous initiatives. It revises the framework established by the 2009 Obama-era $8,000 First-Time Homebuyer Tax Credit, which aided over 2.6 million renters in purchasing their first homes.

Today’s homebuyers face challenges akin to those addressed by the earlier program, including limited availability of new construction homes, affordability concerns, and diminished opportunities for wealth building through real estate.

The Biden Administration has pledged to tackle these issues, aiming to enhance home affordability, raise wages for low-income households, and reduce wealth disparities, particularly among racial groups.

Given these shared objectives, it is anticipated that the Biden Administration will introduce the tax credit program ahead of the 2024 election, aligning with its commitment to addressing the needs of current homebuyers.

---

What is $15000 first time home buyer tax Credit?

The federal first-time homebuyer tax credit was implemented as part of the extensive measures to revive the U.S. economy during the Great Recession.

The First Time Home buyer Tax Credit is a proposed $15,000 refundable tax credit aimed at assisting first-time homebuyers, but it has not yet been enacted into law. To qualify, potential buyers must meet several criteria outlined in the bill:

1. First-Time Homebuyer: Eligible buyers must not have owned a home or co-signed a mortgage within the last thirty-six months. This includes primary residences, second homes, and vacation rentals. However, those who owned a home more than thirty-six months ago or own commercial properties through a business remain eligible.
2. Single-Use Tax Credit: The tax credit can only be claimed once. For example, if a buyer claims the credit in 2024, they cannot claim it again for subsequent home purchases.
3. Income Limits: Buyers must have a modest income, earning within 160 percent of the area’s median income. Income limits vary based on location and household size. For instance, in Columbus, Ohio, where the median income is $60,000, single earners must have a household income of less than $96,000 annually.
4. Age Requirement: Buyers must be at least 18 years old at the time of purchase, or married to someone at least 18 years old. This rule prevents adults from buying homes in a child’s name to claim the tax credit on the child’s tax returns.
5. Purchase from Non-Relative: Buyers must engage in an arms-length transaction, purchasing the home from a non-relative. Relatives include spouses, parents, children, aunts, uncles, cousins, or grandparents. The bill does not provide specific guidance on purchasing from entities controlled by relatives, such as trusts.

However, a similar $15,000 tax credit proposal for first-time homebuyers, known as The DASH Act, is currently active in the ongoing congressional session. It’s worth noting that neither of these bills impacts current mortgage rates for first-time buyers.