$15K first-time homebuyer tax credit
President Joe Biden and Rep. Earl Blumenauer introduce a bill targeting low- and middle-income earners, incentivizing first-time home buying with $15,000 tax credit.
Give me the details
Biden’s “First Down Payment Tax Credit,” if implemented, would create a permanent, refundable tax credit for first-time buyers. First-time buyers are defined by the federal government as people who have not owned a residence within the previous three years.
The bill will create a refundable tax credit worth up to 10% of the purchase price, or $15,000. Taxpayers can choose to treat the purchase of their home as occurring in the prior taxable year to receive the credit sooner.
As home prices and demand continue to rise locally and nationally to unrivaled levels, the tax break proposal is set to counter the country's affordability crisis by motivating first-time homebuyers, specifically those in low to middle income earners.
In order to be eligible for the full credit you must meet all of following requirements:
- Buyers cannot have owned or purchase a home within the past 3 years
- Buyers must make no more than 160% of the area median income
- Homes purchase price must be no more than 110% of the area median purchase price
- Buyers must use the home as primary residence for at least 4 years, or face taxes to recover a portion of the the credit
What are the implications if passed?
Many economic experts and Realtors alike express concern for a continued supply crisis. The tax credit increases incentive, which spikes demand and with an already historically low level of inventory so many of the new first-time home buyers will likely pay higher home prices.
Sunny Shaw, president of the National Association of Housing and Redevelopment Officials believes this will alleviate the affordability crisis and encourage homeownership.
Chief Economist, Rob Dietz says . . .
“It’s certainly a positive step, particularly for frustrated first-time homebuyers that are looking for that additional financial boost to try to attain homeownership,” Dietz told MPA in an interview. “Right now, however, the challenge in the market is on the supply side. Even if you boost demand, you still have to solve some of the supply-side challenges that are limiting inventory because the risk would be that you would increase demand, further boost home prices as demand increases and, without a corresponding supply response, you would just then offset some of the benefits that would come from the tax credit.”