First-Time Homebuyer Tax Credit

The "old" First Time Homebuyers Tax Credit (FTHBC) is an expired tax credit that was available for 2010 and earlier tax returns. Therefore, 2010 was the last year in which the First-Time Homebuyer Tax Credit was available to all taxpayers. The information for the 2008-2010 credit further below will remain on this page for filers amending 2010 and earlier tax returns (members of the military may be able to claim the credit on their amended 2011 Tax Returns).

First-Time
Homebuyer

Certain military personnel, members of the Foreign Service, and employees of the intelligence community may qualify to claim the FTHBC on their amended 2011 Tax Returns. Find out about the extended Homebuyer Credit for members of the armed forces.

First-Time Homebuyer Tax Credit: An Overview

The credit was introduced in 2008 as part of the Housing and Economic Recovery Act. If you qualified for the credit in 2008-2010, but you did not claim it on your return, you may file an amended return in order to claim it.

Need to repay your First-Time Homebuyer Credit on your Return? See how to e-file Form 5405 with your return.

KEY TAKEAWAYS

• The original First-Time Homebuyer Credit has since expired and many taxpayers are paying it back each year with their taxes - see how to include Form 5405 with your return or how to correct a rejected return for not including it.
• There are multiple plans or attempts to bring back a tax credit for first-time homebuyers, but nothing has been signed or passed.
• There are very few credits or deductions for homebuyers, but there are many ways to save on taxes if you own your home through itemized deductions.
• Some states may have programs in place to assist people in buying their first home, such as offering loans with little-to-no down payments.

Tax Breaks for Buying a Home This Year

In the United States, a few first time homebuyer programs have been established by the federal and state governments. Below, find several incentives or programs for first-time home buyers that may become law soon. None of these have been voted on beyond the Senate, so nothing is law. We will keep this page updated with the facts.

The latest: in early 2024, talks of re-introducing the first-time homebuyer program were brought up again to provide up to $10,000 for first-time buyers through $400 monthly payments over two years. The program also may include up to a $25,000 down payment for first-generation homebuyers "whose families haven't benefited from the generational wealth building associated with homeownership." It also aims to eliminate the title insurance on federally backed mortgages which could save homeowners an average of $750 on their mortgage refinance.

This has not been passed and thus does not apply to 2023 year taxes or a home purchased 2023 year.

The First-Time Homebuyer Act

Previously, President Biden proposed the First-Time Homebuyer Act which would grant taxpayers a refundable tax credit called the First-Time Homebuyer Credit of up to $15,000 on the purchase of their first home. This bill has not been enacted. If signed, however, the program would be for home purchases beginning on January 1, 2021 and may be retroactive for homes purchased in 2020. The credit may become permanent if passed as there is no end date in the drafts of the bill. As such, if signed into law, it may see inflation adjustments over the years. This could be a credit of $15,000 in 2021; $15,300 in 2022, $16,600 in 2023, $16,000 in 2024, and so on.

Generally, to be classified as a first time home buyer eligible for the credit, the taxpayer must:

• Be purchasing a home for the first time in their life (the credit cannot be used to purchase a second home or rental home) and claiming the credit for the first time
  • If you claim the credit with a spouse who has already claimed the credit, then you would qualify for half of the credit amount ($7,500).
• Have not owned a home in 36 months prior to the purchase
• Fall within certain income limitations
• Be purchasing a primary residence, not a second home nor rental property
• Be 18 years or older or married to a spouse who is at least age 18
• Be purchasing the home from a non-relative.

Eligible taxpayers would receive this credit when filing their return following the year of the purchase. The credit would be generally geared towards middle-to-lower income Americans. It will likely be for taxpayers earned under $100,000 annually or married taxpayers making under $200,000 annually - specifically, the bill states that buyers must earn equal to or less than 60% above the income median for their area. The amount of the credit is equal to 10% of the purchase price, limited to a maximum of $15,000 or $7,500 for married individuals filing separately.

If you sell and/or move from this home within four years, you will have to pay back some or all of the credit. This means even if you have to change your address for work or to live with a newly married spouse, you may have to repay the credit.

This bill is one of President Biden's many campaign promises that has not yet passed, similar to student loan debt cancellation. Keep up to date with tax news like a new first time home buyer credit and student loan cancellation - we will keep the news page updated with the facts.

Keep up with home tax deductions to claim and energy efficient home improvements if you own a home or plan on purchasing a home. eFile.com will help you report these deductions on your taxes and help you get the most out of your tax refund - sign up and start for free.

If any of these programs are signed into law, the eFile Tax App will be updated with all required forms and calculations needed to file your return if you recently bought your first home.

First-Time Home Buyer Grants or Credits Today

There are a few drafts of various grant payments and tax credit incentives for first time home buyers.

The Down Payment Toward Equity Act

In additional to the drafts of the reintroduced First-Time Homebuyer Credit, there is also similar program called the Down Payment Toward Equity Act of 2021 introduced in April of 2021. This program is not signed into law. If it is signed, taxpayers purchasing a new home may be eligible for a cash payment or rebate of up to $25,000. When combined with the above federal credit, eligible taxpayers may be able to claim $40,000 when buying their first home.

The bill aims to give $20,000 to first time homebuyers, plus the additional $5,000 for home buyers who qualify as a "socially disadvantaged individual" - essentially, those who identity as a minority racial or ethnic group.

The First Generation Down Payment Assistance Program

As part of the Housing Is Infrastructure Act of 2021, this program awards a $25,000 cash grant to first-time home buyers. This program is not signed into law. These programs are similar, but this one has simpler guidelines, only requiring that the homebuyer be a first time buyer whose legal guardians do not own a home currently. Otherwise, the guidelines are the same as outlined below and there is no additional benefit for identifying as a minority racial or ethnic group.

Note: If any, only one of these will pass and there will be no means of "double dipping" on two grant programs to get savings of up to $50,000.

To be eligible for the proposed grant(s), the taxpayer must:

• Be buying a home for the first time (the credit cannot be used to purchase a second home or rental home)
• Meet certain income limitations based on the area of the taxpayer
• Be intending to use the home as a primary residence
• Use a mortgage backed by the government (Fannie Mae, Freddie Mac, FHA, VA, and USDA)
• Be a first-generation home buyer for their family; have lived in foster care; or have legal guardiancy who had defaulted on a home loan.

Since these programs are cash grants instead of tax credits or loans, the payment could be used up front as a down payment, to cover various real estate closing costs, reductions for mortgage interest rates, and many other expenses due to the home purchase. For example, in purchasing a $200,000 home, one could use the $25,000 to:

• Make a down payment of $20,000, potentially matching it with their own $20,000 make a payment of 20% of the price
• An additional $2,000 for real estate agent payments and closing costs
• $2,000 for mortgage rate access through a government backed program
• $1,000 for related home purchasing costs.

To receive the payment, the purchaser must have earned income within 20% over the median income for the area in which they are purchasing the home. Generally, this will apply to taxpayers making under $100,000 annually or married taxpayers making $200,000 per year. Nothing is needed of the purchaser to receive the grant payment when closing on the home if any of this is passed into law.

If you move from this residency within five years for any reason, you would have to pay some or all of this money back.

If any this is signed into law, no action is needed to receive the payment if you are eligible as mortgage lenders will take care of this automatically.

The Build Back Better Act - Canceled

This act, perhaps referred to as Biden's homebuyer program or the Biden homebuyer tax credit, would have provided a $25,000 cash grant similar to the programs above, but the BBB failed to pass in 2022.

The First-Time Homebuyer Refundable Credit as Part of the Decent, Affordable, Safe Housing for All (DASH) Act

Introduced in August of 2021, this act would provide up to a $15,000 refundable tax credit to first-time homebuyers who meet certain price limits, are at least 18 years, are a U.S. citizen, and make less than $100,000 per year or $200,000 as a married couple. This has not been signed into law.

Other Home Buyer Deductions, Credits, and Incentives

While the original versions of the first time Homebuyer Credit have expired and the newly introduced federal credits may not become law, there are many federal and state incentives for those buying a home for the first time. There are many programs, such as Mortgage Credit Certificates or MCCs, which may reduce your tax liability. This is done by being granted the MCC which can then be used to claim the federal Mortgage Interest Credit of up to $2,000 on your IRS Return. This nonrefundable tax credit is separate from the itemized mortgage interest tax deduction and is for interest paid during the tax year and is reported on Form 8396 - eFileIT. The mortgage interest credit can carry over up to three years from the year it is claimed.

Claim these home-related tax credits and itemized deductions on your return:

• Mortgage insurance deduction
• Mortgage interest deduction
• Property tax deduction or state and local tax deduction (SALT)
• Residential Energy Efficient Property Credit or the Nonbusiness Energy Property Credit.

eFile.com will help you claim the most beneficial deductions and credits for you based on your tax situation and home information - start free.

Here are a few remaining incentives which are only proposals continued from the list above; we will update this page if they are ever signed into law.

Low Income First Time Home Buyer Act (LIFT)

Introduced in September of 2021, the LIFT Homebuyers Act aimed to provide low interest rates to first-generation homebuyers. It would reduce the mortgage interest paid so the homes could be paid off in 20 years instead of 30 and could be paired with one or multiple of the other incentives on this page. This has not been signed into law.

Uplifting First-Time home buyers Act

Currently, when a first time home buyer purchases their home, they can withdraw up to $10,000 from their individual retirement arrangement and face no 10% early-withdrawal penalty. In fact, you can do this to buy, build, or rebuild a home. This is only for IRAs - other retirement funds, like a 401(k), will still result in a penalty. This act, which has not passed, would allow this to be up to $20,00 for first time homebuyers only.

Transforming Student Debt to Home Equity Act

This plan aimed to provide assistance to those with non-default federal student loan debt in purchasing foreclosed homes owned by the federal government, the Federal Home Loan Mortgage Corporation, and other organizations. It would also provide lower mortgage rates, discounts, and provide down payment assistance. This has not been signed into law.

There are other incentives for those buying their first home, including state and local government grants, the National Homebuyers Fund (NHF), down payment assistance, forgivable mortgages, and closing cost assistance programs.

The remaining information is geared towards the original First-Time Homebuyer Credit.

First-Time Homebuyer Credit Repayment

Who needs to repay the First-Time Homebuyer Credit?

The original credit for home buyers was less of a credit and more of an interest-free loan. Taxpayers who took the refundable credit in 2008 are obligated to repay the credit over 15 years. If you sell the home prior to repaying the credit, you must pay it in a one-time lump sum payment equal to the balance. This is done via Form 5405 - search for free PDF forms here or you can eFileIT with your return.

If the credit was taken in 2009 or 2010, it may not have to be repaid as long as the home was owned for three years after the purchase and it remained as a primary residence.

You can check the First Time Homebuyer Credit Account Look-up tool on the IRS website. This online tool helps taxpayers to accurately report your repayment obligations on your tax return. You will also be able to check the original amount of the credit, annual repayment amount, total amount paid (with the most recent account update) and the total balance left to be paid.

First-Time Homebuyer Credit Account Look-up

Alternatively, you can call 1-800-919-0352 to report your credit obligations to an IRS representative. You will need to enter your Social Security Number, date of birth, and complete address in the FTHBC online tools.

Repayment of the First Time Homebuyer Tax Credit is done via an additional tax on your annual income tax return. The credit must be repaid at a rate of 6^2/3% or 1/15 of the credit amount owed. If the maximum amount of the credit was taken, this generally works out to repayments of $500 per year. The credit is still required to be reported and paid back even if you wouldn't otherwise have to (e.g. don't have earned income).

When you prepare your taxes on eFile.com, you will be asked if you have to repay this credit. Input your information about the credit on the eFile App and we will report it on Schedule 2 and eFileIT with your return. IT's that easy!

Failure to report this information will result in an IRS rejection. On eFile.com, you can add this information when you sign in and re-efile for free.

Credit Deadlines

The deadline to close on the purchase of a home and still qualify for the First-Time Homebuyer Tax Credit was September 30, 2010. But before you closed the sale, you must have entered into a binding contract before May 1, 2010. If you met both of these deadlines, you may be able to claim the credit on your 2010 Tax Return.

2010 Tax Credit for First-Time Homebuyers and Current Homeowners

The following information is strictly for previous year returns and does not apply. Review the information below only for informational purposes.

If you bought a home in 2010, you will want to know about the First-Time Homebuyer Tax Credit:

• Unlike the First-Time Homebuyer Tax Credit from previous years, the 2010 credit need not be repaid as long you own your house for at least three years and it remains your primary residence during that time.
• The First-Time Homebuyer Credit will allow taxpayers a maximum credit of up to $8,000 or $4,000 for married filing separately individuals.
• The full amount of the credit is refundable, which means that you would get it in your tax refund if you owed the IRS less than the amount of the credit.
• The credit may be claimed by many current and/or previous homeowners who purchased a new home to be their primary residence.

The credit was an amount up to $8,000 or 10% of the purchase price - it could not be used on a home purchase of $800,000 or more. Taxpayers with a modified adjusted gross income under $75,000 or $95,000 for married filing jointly were eligible for the credit. Those with a MAGI between $75,000 and $95,000 (or $150,000 to $170,000) would receive a reduced amount.

Claiming the First-Time Homebuyer Tax Credit does not necessarily disqualify you from claiming another credit for homeowners (for example, the Mortgage Interest Credit). You may be able to claim multiple such credits on your home purchase. Learn more about tax deductions and tax credits for homeowners.

Credit Qualifications

• Even if the home you purchased this year wasn't your first, you may still qualify and be able to claim the tax credit. Homebuyers who have not owned a primary residence for three years leading up to the date of purchase qualify for this credit. For married couples, this restriction applies to both spouses.
• To qualify for the Homebuyer Tax Credit, you must have entered into a contract to buy your home on or before April 30, 2010 and you must have closed the sale by September 30, 2010.
• The amount of the credit begins to phase out at modified adjusted gross incomes of greater than $125,000 for single filers ($225,000 married filing jointly) and phases out completely at $145,000 ($245,000 married filing jointly).
• The credit may be claimed only on a primary residence. You may own more than one home, but you must use the newly purchased home as your primary residence in order for it to qualify for the credit.
• The credit is refundable, so you may receive it in your tax refund if you owe no tax or if the credit amount is greater than your tax liability.
• Special Extension for Members of the Armed Forces: Military personnel who served outside of the U.S. for 90 days or more between Jan. 1, 2009 and May 1, 2010 may qualify for an extension of one year.

To claim the First-Time Homebuyer Credit, if you purchased a home in 2010, 2009, or 2008, you may file an amendment on your 2011 (military only), 2010, 2009, or 2008 Tax Return and attach Form 5405 to the amendment.

If you have previously owned a home for at least 5 consecutive years in the 8-year period which ends on the day you purchase your new home, and used it as your primary residence, you may qualify for a tax credit of up to $6,500. The income phaseouts and other eligibility requirements for this version of the credit are the same as those described above.

Credit Restrictions

Several restrictions apply to the First-Time Homebuyer Credit for any homes purchased in 2010. In fact, these restrictions apply to all homes purchased after November 6, 2009:

• You (or your spouse) must have been at least 18 years old on the purchase date.
• You may not be claimed as a dependent on another person's tax return.
• The purchase price of your home must not exceed $800,000.
• You must attach a properly executed settlement statement to your tax return.
• Your application for the credit may be denied due to an error in math, without the IRS having to conduct a full audit. (Using eFile.com is a great way to eliminate math errors.)

Purchased a Home Before 2010

Taxpayers who purchased their first homes between April 8, 2008 and January 1, 2009 may qualify for a different tax credit of up to $7,500, to be paid back interest-free in 15 equal yearly installments ($3,750 for married filing jointly individuals). If you didn’t claim this credit on your 2008 Tax Return but think you might qualify for it, you can file a tax amendment. You can also file an amendment if you purchased a home in early 2009 and claimed the credit on your 2008 Return, but now want to take advantage of the 2009 credit instead. Remember that if you purchased a home after Nov. 6, 2009, you are subject to the newer restrictions outlined above.

Purchased a Home After November 6, 2009

You must include a paper copy of the settlement statement with your tax return. This is generally a Form HUD-1 which shows all parties' names and signatures, the address of the property, the final sales price, and the official date of purchase.

If your new home was newly constructed with no settlement statement, you must include a copy of the certificate of occupancy showing the owner’s name, the address of the property, and the certificate's date.

If your new home is a mobile home with no settlement statement, you must include a copy of the retail sales contract showing all parties' names and signatures, the current address of the property, the purchase price, and the date of purchase.

If you are a long-time homeowner, you must prove that you occupied a prior home for at least a 5 year period in the last 8 years. The IRS recommends that you include with your return at least one of the following: property tax records, homeowner's insurance records, and/or a Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements.

Documentation Requirements

The IRS requires that those new homebuyers who purchased their home after November 6, 2009 attach a copy of their settlement statement to their 2010 Tax Return or 2009 Amendment. Normally, the signatures of both the buyer and seller are required, but the IRS will accept settlement statements that are in compliance with local laws (e.g. in cases where there is not a signature line for both parties). Nonetheless, the IRS encourages homebuyers to sign their settlement statements, even if there is no seller's signature or if there are no lines for signatures at all.

Other Deductions and Credits

See what other tax credits and tax deductions you may qualify to claim on your tax return.

Let us help you find out which credits and/or deductions you can claim! When you prepare your tax return on eFile.com, we will select the correct tax form(s) for you based on your answers to several tax questions, as well as guide you through reporting your credit or deduction (which will be calculated with 100% accuracy).

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