Nathan connects with individuals, communities, and news outlets to help educate them on money matters and stimulate financial awareness. He believes that achieving financial success begins with identifying your priorities and facing them head on. You may have seen Nathan on your local news station talking about using credit cards responsibly, building good credit, and more.
/ Reviewed by Sandra KenrickSandra is qualified as a financial advisor with business accreditation and has an eye for detail. She got her start in the banking industry working with small businesses and startups – and she can tell a good deal from a shiny gimmick. Her passion lies in writing about personal finance and entrepreneurship.
Updated Jan. 23, 2024 Read time 6 minReady To Buy a Home?
Rocket Mortgage ® lets you get to house hunting sooner.
Start My ApplicationIf you’re in the market to buy a house, you’ll want to know everything there is to know about first-time home buyer tax credits and grant programs – including a bill awaiting congressional approval – the First-Time Homebuyer Act of 2021. [1]
The First-Time Homebuyer Act of 2021 promises qualifying home buyers a $15,000 tax credit to purchase a home. [1]
While the bill works its way through Congress, there are other incentives qualified first-time home buyers can take advantage of – like other federal and state tax credits, grants and more – that could potentially save you hundreds, if not thousands, of dollars.
What are you looking to do?
NMLS #3030 Affiliation Disclosure --> Affiliation Disclosure
A first-time home buyer tax credit is a government program that gives first-time home buyers a break on their income taxes. Federal, state and local housing tax credits are home buyer incentives that help make homeownership accessible and affordable.
Federal first-time home buyer tax credits aren’t a new phenomenon. They’ve been around since the 2000s. The first home buyer credit program was the 2008 First-Time Homebuyer Credit. [2]
In 2006 and 2007, a housing bubble developed in the U.S. In 2008, the housing market bubble burst, leading to the Great Recession, which had long-term consequences for the U.S. economy and the banking sector. In the wake of the recession, lenders tightened the criteria to qualify for mortgages. And many potential buyers found it harder to qualify for home loans.
The U.S. government introduced first-time home buyer tax credit programs to revitalize the economy after the housing bubble burst in 2008, including the 2008 Housing and Economic Recovery Act (HERA). The goal was to revitalize the American economy and encourage people to buy homes. [2]
Qualified buyers who closed on properties between April 8, 2008, and January 1, 2009, could get the temporary tax credit, which worked as an interest-free loan. [2]
Home buyers could get a maximum credit of $7,500 and had 15 years to repay the credit on their federal income tax returns. (If you got $7,500 in 2009, you’d pay back $500 on your tax returns from 2010 to 2025.) [3]
In 2009, HERA was modified under the American Recovery and Reinvestment Act. This time, qualified first-time home buyers got a tax credit of up to $8,000 – but they didn’t have to pay it back. [4]
The tax credit program, which ended in 2010, is no longer available to first-time home buyers. But the First-Time Homebuyer Act of 2021 builds off the federal government’s legislative legacy of supporting first-time home buyers.
U.S. lawmakers introduced the First-Time Homebuyer Act in April 2021. The bill supports a key campaign promise of President Biden to address the housing affordability crisis. [5]
The bill, which has not been enacted, proposes a tax credit worth up to 10% of a home’s purchase price or $15,000 max. The credit would apply to all home purchases beginning January 1, 2021, and may even work retroactively for homes bought in 2020. [5]
If you qualify, the tax credit will lower what you owe in federal taxes. If you’re married but file taxes separately from your partner, each of you can claim half the total credit amount you qualify for.
Here are the requirements eligible home buyers must meet under the proposed bill [5] :
Still not sure if you’re eligible? Talk to a lender like our vetted recommendation:
Breaking the rules of the program can mean repaying all or part of the tax credit. The biggest taboo is moving or selling your home too soon. So, if you plan on flipping a house, this tax credit isn’t for you. [1]
The program is designed to help low- to moderate-income home buyers buy homes and close the home affordability gap. It’s not geared toward investors. If you sell or move within 4 years of buying the home, you’ll have to pay back a percentage of the tax credit [5] :
The Downpayment Toward Equity Act of 2021 hasn’t been passed yet, but you should make it your business to know what it is.
The proposed bill, which was also introduced in April 2021, would issue $25,000 grants to qualifying first-time home buyers to apply toward [6] :
While the First-Time Homebuyer Act and the Downpayment Toward Equity Act work differently, if passed, first-time home buyers could potentially qualify for both of them, adding up to a total of $40,000 in cash and tax credits.
Congress hasn’t passed the First-Time Homebuyer Act. But aspiring homeowners have lots of existing local and state-wide programs to choose from that offer first-time home buyer grants and tax credits.
Many states offer 0% interest loans or grants to help with down payments or other related home purchasing costs. Some research into your state’s programs could save you thousands of dollars, so it’s worth starting now.
There are tax benefits you can take advantage of after you buy a home. There are tax write-offs available to homeowners even if the home is not their first home.
There is no shortage of assistance for first-time home buyers.
When it comes to finding cash, grants or tax credits to buy your first home, seek – and if ye qualify – ye shall find. Do your research and stay on the paths that can help guide you to the front steps of your first home.
Get approved. See what you qualify for. Start house hunting.
