Biden’s $15000 First-Time Homebuyer Tax Credit 2021
Mar 29, 2023
CEO and Co-Founder of Stairs Financial, a YC-backed startup that connects first-time home buyers with down payment assistance programs across the US. Malcolm-Wiley studied economics at Harvard and is a licensed mortgage broker.
For almost everyone, the biggest challenge in buying a home is covering the upfront costs, primarily the down payment. It’s a totally understandable challenge, given that a down payment is a relatively large chunk of change.
That’s why the Biden $15000 tax credit created so much buzz when it was introduced in 2021. When the bill passes into law, it could help many people turn their dream of owning a home into a reality.
In this guide, we cover everything you need to know about Biden’s $15000 first-time home buyer tax credit: what it is, who’s eligible, and most importantly, how to get the benefit when it becomes available.
Understand all your options for down payment assistance
Biden’s $15000 tax credit is just one program geared toward helping first-time home buyers. Other programs, like Biden’s First Time Homebuyers Grant, are working their way through the pipeline now.
There are also a number of down payment assistance programs available right now through federal and local governments, nonprofits, and mortgage lenders.
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Disclaimer: This article is for informational purposes only and should not be considered as legal or financial advice. Please consult an attorney, mortgage lender, or CPA for guidance on your specific situation.
What is the Biden $15,000 tax credit?
The Biden $15,000 tax credit is a tax credit for first-time home buyers which reduces your tax burden for the year in which you purchase the home. The tax credit is not a loan or a grant, so it doesn’t disburse funds at the time of purchase. Home buyers receive the tax credit when they file their taxes for the year.
Is Biden’s $15,000 homebuyer tax credit available yet?
Biden’s $15,000 homebuyer tax credit isn’t available yet. It is a bill under consideration, but hasn’t been passed into law. The bill, H.R.2863, was introduced in April, 2021. Congress has gone over the bill, and it may well become law in the coming years.
If you’d rather not wait for legislation to pass before you buy a house, there are other down payment assistance programs available right now for first time home buyers. Stairs can help you understand your options. Learn more about the down payment assistance programs you qualify for.
Who is eligible?
The bill isn’t yet law, so the requirements might change. But as of right now, to be eligible for Biden’s $15,000 first-time homebuyer tax credit you must have not owned a home within the past three years and your income must be less than or equal to 60% above the area median income where the home is located.
Here is the full set of requirements as it currently stands. In the bill’s current form, you must meet these criteria to qualify for the first-time homebuyer tax credit:
First-time home buyer: This is defined as not owning a home within the past three years.
Moderate income: To be eligible for the tax credit, you must earn less than or equal to 60% above the median income for the area in which the home is being purchased. To calculate this, multiply the median income in your area by 1.6.
Median home price: The purchase price on the home must be no more than 10% above the median home price for the area. To calculate this, multiply the median home price in your area by 1.1.
Primary residence: The home must be used as your primary residence. You cannot use the tax credit to purchase a second home or a rental property.
18 years or older: You must be at least 18 years old or be married to someone who is at least 18 years old.
Purchasing from a non-relative: You must be purchasing the home from someone who is not your relative.
As we mentioned above, the requirements may change before the final bill passes. However, these are the current $15,000 first-time homebuyer tax credit eligibility requirements.
What type of home can I buy with the $15,000 tax credit?
The $15,000 Biden home home tax credit can be applied to the purchase of any complete home which is zoned as a residential property, so long as the home is your primary residence. This includes mobile homes, trailer homes, and manufactured houses.
You can even purchase a multi-unit home and rent out the other units, so long as one of the units is your primary residence. However, you cannot receive the tax credit if you purchase a second home, rental property which will not be your primary residence, or undeveloped land on which you intend to build a house.
How does Biden’s first-time homebuyer tax credit work?
Biden’s first-time homebuyer tax credit reduces your tax burden for the year by 10% of the value of the house you purchased, up to a maximum of $15,000. This tax credit doesn’t reduce the amount you pay for the home, it reduces any taxes you owe for the year.
The credit is refundable, which means you’ll get a tax refund if the credit reduces your taxes owed to below zero.
Example 1: If you filed your taxes and owe $20,000 before accounting for the tax credit, your tax bill would be just $5,000 after the credit.
Example 2: If you filed your taxes and owe $5,000 before accounting for the tax credit, you will receive a $10,000 refund after the tax credit.
The tax credit bill also has provisions to account for inflation. Therefore, the total amount of the tax credit is given in inflation-adjusted dollars.
The big difference between Biden’s first-time homebuyer tax credit and most other down payment assistance programs is that the tax credit will not pay out any money when you purchase the house.
However, as the bill is written right now, you can claim the $15,000 tax credit even if you purchase a home with funds from another down payment assistance program.
Here is the history of the bill as it currently stands:
First-time homebuyer tax credit 2021
The first-time homebuyer tax credit bill was written in 2021, so this sometimes causes confusion. Unfortunately, the bill wasn’t passed into law that year, so if you bought a home in 2021 you couldn’t take advantage of it at that time.
First-time homebuyer tax credit 2022
Many homebuyers hoped the bill would be signed into law in 2022, but that deadline came and went. However, there were other down payment assistance programs available for many first-time homebuyers.
First-time homebuyer tax credit 2023
We are all still hoping the first-time homebuyer tax credit will be passed into law in time to take effect during 2023. That being said, these things tend to move slowly so there are no guarantees.
One piece of good news: you could still be eligible for this tax credit if you purchased your home on or after December 31, 2020. The bill was introduced in 2021, so it covers homes purchased from 2021 onward, even if the bill isn’t passed for several years.
Will I have to pay it back?
You do not have to pay back Biden’s $15,000 homebuyer tax credit, provided you live in the purchased home for at least four years. If you move or sell the house within four years of purchase, you will have to pay back all or some of the tax credit.
These are the repayment amounts:
- Move or sell the home within 1 year: repay 100% or $15,000
- Move or sell the home within 2 years: repay 75% or $11,250
- Move or sell the home within 3 years: repay 50% or $7,500
- Move or sell the home within 4 years: repay 25% or $3,750
There are a few exceptions to this repayment rule.
If you sell the home to a relative, you must only repay the taxes on the real estate gains. For instance, if you sell the house to a relative for $4,000 more than you bought it for, you’d only have to repay the taxes on that $4,000 above the buying price.
There are also exceptions that cover life events such as death, divorce, and some military transfers.
How do I apply?
You won’t have to manually apply for the $15,000 Biden homebuyer tax credit. If the bill is passed into law, simply fill out the associated IRS form when you file your taxes for the year, and the credit will automatically apply to your taxes.
To apply for the Biden homebuyer tax credit:
1. Keep the closing documents from your home purchase.
When you file your taxes, you will most likely need to provide the settlement statement from the purchase.
2. File your taxes at the end of the year.
You’ll need to fill out an extra tax form related to the homebuyer tax credit. If you aren’t sure how to do this, it might be worth hiring a professional to help you complete your taxes this year.
3. File an amended tax return for retroactive claims.
If you purchased your home in a previous year (on or after December 31, 2020) and would have qualified for the tax credit, you can file an amended tax return to retroactively claim the tax credit once the bill becomes law. Work with a tax professional if you need to file an amended tax return.
What’s the difference between Biden’s first-time homebuyer tax credit and Biden’s downpayment assistance?
Biden’s downpayment assistance grant pays out cash at the time of home purchase. This money can be used to cover the down payment and other upfront costs. Biden’s first-time homebuyer tax credit doesn’t pay out money at the time of sale. Homebuyers have to wait until they file their taxes to see any benefits.
In terms of impact, Biden’s downpayment assistance grant is more helpful for covering the initial costs of buying a house.
The Biden first-time homebuyer tax credit has more impact on the ongoing costs of owning a home because it helps reduce your overall costs when you next file your taxes, which will likely be some months after the home is purchased.
Can I get down payment assistance in addition to Biden’s $15,000 tax credit?
As of right now, there are no stipulations that prevent buyers from using other down payment assistance programs along with the first-time homebuyer tax credit. It’s possible that down payment assistance funds could increase your taxable income, but you could still claim the tax credit.
Almost every state has at least one state-sponsored down payment assistance program, and there are many assistance programs offered by private institutions and non-governmental organizations.
Stairs sorts through these down payment assistance programs to find all the programs you qualify for, compares your options side-by-side, then connects you with lenders who are familiar with the program that best meets your needs. Learn more about your down payment assistance options.
Frequently asked questions
For quick reference, here’s a roundup of the most common questions about Biden’s $15,000 tax credit.
Who’s eligible for the Biden $15,000 tax credit?
To be eligible for the Biden $15,000 tax credit, you must meet these criteria:
- No home ownership in past three years
- Earn no more than 60% above area median income
- Purchase price no more than 10% above median home price for area
- Home used as primary residence
- At least 18 years old
- Purchase the home from a non-relative
Is the Biden $15,000 tax credit available yet?
Update September 1, 2023: No, the Biden $15,000 tax credit isn’t yet available. The bill was introduced in 2021, and is still being considered in congress. However, the tax credit will most likely be retroactive. If you purchased your home after December 31, 2020, you should be able to file an amended tax return to receive the credit once the bill passes.
How do I get my $15,000 tax credit?
If and when the bill passes, the IRS will most likely introduce a form for the tax credit. You’ll simply fill out the form when you file your taxes for the year, provide the home purchase settlement statement, and the tax credit will be automatically applied to your tax bill.
If my partner has already bought a home, can we still get the Biden home tax credit?
Yes. If your partner already has a home, but you are a first time home buyer, you can claim 50% of the Biden home tax credit. This reduces the maximum tax credit to $7,500, rather than the standard $15,000.
Is the $15,000 homebuyer tax credit the same as Biden’s $25,000 first-time homebuyer grant?
No. The $15,000 homebuyer tax credit gets applied to your tax bill for the year you buy a house. Biden’s $25,000 first-time homebuyer grant pays you directly when your home sale closes, and the funds can be applied to upfront home purchase expenses.
Will the first-time homebuyer tax credit pass?
Unfortunately, no one knows for sure if the first-time homebuyer tax credit will actually pass. The bill that would make the credit a law has been referred to the House Ways and Means Committee, but congress has not yet voted on it. It must be approved by both the house and the senate.
How will I know when the act becomes law?
It’s unclear exactly when the act will become law. If you contact us at Stairs Financial, we’ll notify you when it does become law. We’ll also let you know if you qualify for any other down payment assistance programs that can be accessed now.
Can Stairs Financial help me get down payment assistance before the tax credit goes into effect?
Absolutely. Want to buy a house right now, rather than waiting for the tax credit act to make its way through congress? Need down payment assistance that pays you directly to cover buying costs?
Stairs Financial can help you weigh all your down payment assistance options.
Stairs connects you to qualified lenders who work with all the down payment assistance programs you might qualify for, then lets you compare your options side-by-side.
With Stairs Financial, you can easily find out exactly which down payment assistance programs are available to you, so you can make a more informed decision.
Find up to $15,000 towards a home 🏠
Compare local down payment assistance and find a mortgage, fast.
Lattice Thinking, Inc. All rights reserved. Lattice Thinking, Inc is a mortgage broker that does business under the business name Stairs Mortgage. Lattice Thinking, Inc is not a mortgage lender and, therefore, does not make residential mortgage loans.
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