Tax Credit FAQs:
First-Time Homebuyer Tax Credit Frequently Asked Questions
Has the rising cost of buying your first home left you on the sidelines? We understand the frustration. But relief may come through a valuable tax credit aimed directly at aspiring first-time buyers. Lawmakers have proposed legislation for a $15,000 Federal First-Time Homebuyer Tax Credit that could make reaching homeownership more feasible.
While the details continue to develop in Congress, you may wonder whether you qualify and how to access the savings now or once the bill becomes law.
The team at LGI Homes has compiled this comprehensive FAQ guide about the $15,000 first-time homebuyer tax credit. We hope to provide the answers you seek right now, help you gain insight into eligibility rules, provide options to use the credit strategically and provide critical steps for capitalizing on this program when the time comes.
Navigating the Basics of the Homebuyer Tax Credit
Whether you're just starting to explore buying a home or deep into your planning stages, understanding the $15,000 First-Time Homebuyer Tax Credit is your first step. Let's tackle some of your general questions regarding this proposed legislative bill.
What is the $15,000 First-Time Homebuyer Tax Credit?
The $15,000 First-Time Homebuyer Tax Credit is a proposed federal initiative to help prospective first-time buyers achieve homeownership. If signed into law, the credit would provide up to $15,000 to help with typical home-buying costs, such as closing and down payments.
Why was this tax credit proposed?
Lawmakers have proposed the tax credit in response to the current market conditions, which makes home purchasing less obtainable, especially for first-time buyers. The idea is for the tax credit to ease the financial burden on would-be homeowners at the point of purchase.
Is this program the same as the Biden First-Time Homebuyer Act?
That's correct. You may have heard this proposed tax credit going by several names, including the First-Time Homebuyer Tax Credit or Biden First-Time Homebuyer Act. When you hear any of these terms, know that it's referring to the same proposed $15,000 federal tax credit for aspiring homeowners.
Understanding Eligibility for the $15,000 First-Time Homebuyer Tax Credit
Of course, eligibility is vital to this potential financial boost to your homeownership aspirations. Here are your key questions regarding who qualifies for this significant tax benefit.
Who qualifies for the $15,000 First-Time Homebuyer Tax Credit?
To be eligible for this tax credit, you must be a first-time homebuyer, defined as someone who has yet to own a home in the last three years. You must not have already claimed the benefit before and be at least 18. Lastly, you must complete an "arm's length" transaction, meaning you are not buying a home from relatives.
What are the income and purchase price limits to qualify for the tax credit?
Your annual income must be at most 150% of the median income for your area (adjusted for family size). The home's purchase price must be at most 110% of the median purchase price in your buying area.
If I'm a first-time home buyer but my partner is not, can we still claim the tax credit?
You can do so as long as you meet the other eligibility criteria. That said, the credit would only apply to your share of the property. For unmarried couples, each individual can claim their portion of the tax credit based on their ownership interest in the property. If only one partner qualifies, they can claim half of the credit.
Securing Your Homebuyer Tax Credit
Let's explore how to access the benefits of the $15,000 First-Time Homebuyer Tax Credit and understand its potential impact on your home-purchasing journey.
Has the $15,000 tax credit been made available to the public yet?
No. The proposal is still under legislative review, and Congress and the Senate must approve it before the President can sign the bill.
What steps must I take to claim the $15,000 tax credit?
Aside from ensuring your eligibility, you would claim the benefit on your tax return during the same year as your home purchase. You may also claim the credit at the point of closing with the help of an approved lender.
*If the bill is approved and becomes law, they may add additional information.
Will the tax credit apply to purchases made before the bill officially passes?
Yes, the bill will be retroactively applied to the beginning of the year it passes. The retroactive tax credit should encourage homebuyers to purchase a home without waiting for it to pass. So, as long as your home purchase is within the same calendar year as the bill's passage into law, you may claim the tax credit.
Guidelines and Limitations of the Homebuyer Tax Credit
Understanding the rules and restrictions of the $15,000 First-Time Homebuyer Tax Credit can help you avoid its caveats and penalties. Here are some of the questions you likely have about the stipulations.
If I must move for work during the first four years, do I have to repay the $15,000 tax credit?
Yes. If you move out of your home within the first four years after taking advantage of the proposed $15,000 tax credit, you will need to repay a portion of the tax credit. Military service requirements and the death of a partner are specific exceptions.
The repayment amount decreases progressively each year you remain in the home—with a 100% return due if you move within a year, sliding down to 25% in year four.
Can the tax credit be used for trailer homes, mobile homes, condos and manufactured homes?
Yes, the $15,000 First-Time Homebuyer Tax Credit applies to various residential properties, including trailer homes, mobile homes, manufactured homes, condos and townhomes, provided they meet all local and federal residential zoning and livability standards.
Can I use the tax credit to buy a multi-unit home and rent other units?
You can use the $15,000 tax credit to purchase a multi-unit home if one of the units will be your primary residence. Please bear in mind that the tax credit will only apply to the specific value of the portion of the property you will live in.
Maximizing Benefits: Integrating the Tax Credit with Other Programs
Leveraging the $15,000 First-Time Homebuyer Tax Credit alongside other programs can amplify its impact. Below are answers to some questions homebuyers have about this.
Can this tax credit be combined with other first-time homebuyer programs?
The $15,000 tax credit can work with other first-time homebuyer programs. You can stack it on top of any other local, state or federal homebuyer programs you qualify for as a first-time buyer, which could see you net tens of thousands of dollars in additional home-buying support.
How does this tax credit interact with federal incentives like FHA, USDA or VA loans?
You may already be aware of federal loan programs such as FHA, USDA and VA loans, which offer benefits like low down payments, favorable interest rates and minimal insurance requirements. The proposed tax benefit would not preclude you from these favorable terms and can help you lower out-of-pocket home-buying costs.
Can this tax credit be combined with the $25,000 Downpayment Toward Equity Act?
In theory, yes. While neither this tax credit nor the Downpayment Toward Equity Act is law, no stipulation in either proposed bill says a first-time homebuyer cannot combine the two incentive programs. Consequently, you could secure up to $40,000 in assistance as a first-time buyer, dramatically lowering the bar to homeownership.
*Remember that both bills are subject to change before they become law.
Prepare for the $15,000 Tax Credit with LGI Homes
If passed, the $15,000 First-Time Homebuyer Tax Credit represents a significant opportunity to lower the entry barriers to homeownership. With the critical questions regarding this legislation answered, you can take advantage of it and claim their benefits retroactively as long as the bills become law in 2024.
Visit our comprehensive homebuyer resources section to learn more about financial assistance and preferential loan programs available for first-time buyers.
With your knowledge of this $15,000 tax credit, you can search for your dream home. Browse our available new home communities or contact one of our New Home Consultants. They can help you explore options and find the perfect home that qualifies for federal and state-backed homebuyer programs.