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First-Time Homebuyer Tax Credit 2021: All Your Questions Answered About Biden's $15k Proposal for Eligible Homebuyers

A new $15,000 first-time homebuyer tax credit bill has hit Congress. Who would be eligible, example scenarios, and FAQ.

April 28, 2021
April 28, 2021
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What is the First-time Homebuyer Act of 2021?

Updated April 28, 2021

This story is developing rapidly. Check back for updates.

This is a bill introduced to Congress on April 26, 2021. It seeks to fill a key campaign promise from President Joe Biden: to give a $15,000 tax credit – or up to 10% of the home’s price ­– to eligible first-time homebuyers.

The goal of the new proposed legislation, called the "First-Time Homebuyer Act of 2021,” is to reduce the wealth gap by giving renters a chance to become owners despite skyrocketing housing costs.

Down payment is typically the biggest barrier to entry when it comes to homeownership. Some renters would even pay less monthly for a mortgage than for rent. But saving for a down payment has thus far kept them from moving forward.

This bill, if passed, would provide that seed money – sort of. Read on.

What's in this Article?

What is the First-time Homebuyer Act of 2021?
Would the assistance be available in advance so I could use it when I’m buying?
This is a “refundable tax credit.” What does that mean?
Will I qualify for the $15,000 homebuyer tax credit?
When will the $15k first-time homebuyer credit be available?
Is this the same as the $25,000 down payment credit?
What should I do because of the bill?

Would the assistance be available in advance so I could use it when I’m buying?

No. The assistance would come in the form of a tax credit. As an example, you would purchase a home in 2021 and claim the $15,000 credit when you file taxes in 2022.

This is different than Biden first proposed on the campaign trail. His vision was an “advanceable tax credit” which would be available at the closing table.

However, according to the website of U.S. Congressman Earl Blumenauer (D-OR), who introduced the bill, “Taxpayers may elect to treat the purchase of their home as occurring in the prior taxable year to receive the credit sooner.”

That might mean that someone could claim the home purchase as happening in 2020, then re-file their taxes in 2021 to receive the credit. Expect more details on re-filing guidance as this bill develops.

Even if re-filing isn’t an option, this credit could give renters the incentive to start planning a 2021 purchase.

Knowing they have an additional $15,000 coming in their tax return could inspire confidence to draw on savings for the initial down payment.

As with all tax decisions, consult a tax professional before filing.

Can I get this credit if I use a zero-down loan?

There is no current requirement that you need to make a down payment to receive the credit.

Home buyers who use a zero-down USDA loan or VA home loan can receive the credit and to do with what they wish: cover money spent on closing costs or help with their first year of homeownership.

This is a “refundable tax credit.” What does that mean?

“Refundable tax credit” means that you can receive the funds in your tax return even if you don’t owe that much in taxes.

For instance, you file your 2021 taxes in February of 2022 and have a $1,500 refund. Claiming the tax credit, you would receive a $16,500 refund.

If, at the end of 2021, you owe $5,000, you would instead receive a tax refund of $10,000.

Your tax obligation is reduced by $15,000 and/or increases your tax refund by that much.

Will I qualify for the $15,000 homebuyer tax credit?

The bill is aimed at those with median-to-lower income for their area.

Keep in mind that bills can go through many revisions as they make their way through Congress. But here’s who is eligible as of this writing. Homebuyers must meet all the requirements, not just one.

  • First-time homebuyers, meaning you or your spouse have not owned a home in the past 3 years
  • Those with incomes at or below 160% of the area median income
  • Those purchasing a home at or below 110% of the area median purchase price

Let’s look at an example.

A couple is buying in an area with a median income of $80,000 and median home price of $300,000. Their combined income is $120,000 and they are buying a home at $310,000.

✓ $120,000 = 150% of the area median income of $80,000. Eligible
✓ $310,000 = 103% of area median home price. Eligible
✓ Neither has owned a home in the past 3 years. Eligible

The requirements don’t seem too restrictive, and could be available to a wide swath of first-time buyers.

When will the $15k first-time homebuyer credit be available?

There are no estimates on timing yet. The bill is still in early stages of approval. It would have to make it through the House and Senate, then be signed into law.

Fortunately, a first-time buyer credit is widely popular and received a lot of attention during Biden’s campaign, improving the chances of passing.

Is this the same as the $25,000 down payment credit?

No. There is a separate bill for first-time, first-generation homebuyers.

Under that bill, you would be eligible for $20,000 if neither you nor your parents ever owned a home. An additional $5,000 would be available for those in disadvantaged social and economic groups.

This $15,000 tax credit would be much more widely available, as there are fewer restrictions on it.

The two bills don’t compete with each other. In fact, Blumenauer’s official press release stated that the $15,000 credit is “just one element of the big, bold housing agenda.” This statement appears to be a nod to the other bill, offering it legitimacy and importance in its own right.

What should I do because of the bill?

One thing is clear: the administration and current Congress is serious about pushing through help for first-time buyers.

It would be wise to prepare yourself financially in case a tax credit becomes available. Check your credit score, examine your budget, and start saving for the initial purchase.

Remember: you won’t have access to the credit until you file taxes, most likely the following year. You will need funds upfront.

I’m ready to apply now

If you’d rather beat the homebuying rush that this bill would surely cause, you can request a preapproval now.

It might not be a bad idea to secure a home before buyers flood the market.


First-time Homebuyer Act of 2021
U.S. Congressman Earl Blumenauer press release

This article does not constitute tax advice. Please consult a tax advisor regarding your specific situation.

Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.

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