What is First-Time Home-Buyer Tax Credit?
The first-time home-buyer tax credit is a financial aid package that aims to ease the federal tax burden of new homebuyers. So, what exactly is a first-time homebuyer tax credit, and are you eligible? Let’s explore this further.
The First-time home-buyer tax credit was available from 2008 to 2010, allowing individuals and married couples who bought their first home during that time to claim a refundable credit of $8,000 on their federal income tax returns.
Currently, a new first-time home-buyer tax credit is being considered in 2023.
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Proposed First-Time Homebuyer Act of 2021
The proposed First-Time Homebuyer Act of 2021 is a form of financial assistance that would give new homebuyers some relief on their federal taxes. The act is similar to a bill that passed in 2008 during the Great Recession to encourage people to start buying houses again. The 2008 First-Time Home-Buyer Tax Credit was a refundable $8,000 credit that new homeowners could claim on their federal income tax returns in 2008, 2009, and 2010. In contrast, the proposed act would give a tax credit of up to 10% of the home’s purchase price, up to a maximum of $15,000, and would be retroactive to December 31, 2020, Ramsey Solutions reported.
Who qualifies as a first-time homebuyer?
To qualify as a first-time homebuyer, an individual must meet some requirements:
- should be 18 years old or older
- buy the home from someone other than a relative
- purchased a primary residence, not a second home or investment property
- have a modest income for their location and household size
Being financially ready to buy a house means having no debt, a fully funded emergency fund of 3–6 months of expenses saved up, and an ideal down payment of 20%. While some homebuyer tax credits can save money when buying a house for the first time, relying on government assistance is not the best idea. Instead, individuals can find housing assistance on the U.S. Department of Housing and Urban Development website.
In conclusion, while the First-Time Home-Buyer Tax Credit Act of 2021 has not been passed into law, there are still assistance programs for new homebuyers through state and local tax incentives. Being financially ready to buy a house is crucial, and individuals should consider all options before purchasing their first home.
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