Save Big With These 3 First-Time Home Buyer Tax Credits

First-time home buyer tax credits became available in 2008 during the economic crisis. As many Americans struggled through the financial downturn, the Housing and Economic Recovery Act was signed to help first-time buyers. This act gave a tax credit of up to $8,000, a sum that could help buyers stay on top of their finances during such a difficult time. You probably heard of this tax credit, and you’re probably wondering: is it still available?

Unfortunately, the 2008 tax credit was only available until 2010. However, the good news is that recent legislation has been introduced at the federal level, and these aim to create significant home buyer tax credits that can put a lot of money back into your pocket.

Because you read our previous post about how to get ready for the buying process, you know it can be a struggle even if you’ve got all your ducks in a row. But you can become a homeowner, and these three proposals are going to make your dream much easier to achieve. Let’s get into the latest first-time home buyer tax credits that lawmakers recently put on the table.

2021 first-time home buyer tax credits

$25k down payment assistance program

If you’re hunting for your first house, this is the biggest home buyer benefit included in recent legislation. It’s called the Downpayment Toward Equity Act of 2021, and it gives first-time buyers up to $25,000 to use toward their home purchase. And, it’s not a tax credit; instead, it’s money that would be available to you when you close on your home.

This is one of several bills lawmakers hope will encourage homeownership among average- and low-income groups. The payout breaks down like this:

• First-time, first-generation buyers, would get $20,000 toward their purchase
• An additional $5,000 would be given to buyers who qualify as being ‘socially disadvantaged.’

As it reads now, this can be combined with other down payment assistance programs. The money can also be used with many common mortgage loans, such as conventional, FHA, and USDA.

This bill was first introduced in April 2021 and may change significantly if it passes. Regardless, legislation like this can help buyers who struggle with the dream of homeownership. Home prices have skyrocketed, everyday expenses have increased, and many buyers carry student loans and other debt, all of which make homeownership prohibitively expensive for many renters. If passed, this kind of assistance can cover most, if not all, of the upfront cost of buying.

$15k home buyer tax credits through the DASH Act

The Decent, Affordable, Safe Housing for All (DASH) Act is another bill introduced in 2021, and it’s one of two proposals that seek to offer up to $15,000 in home buyer tax credits. To qualify, you must be a first-time buyer, meaning someone who has never owned a home. The home must also be your primary residence, or in other words, the place you plan to live in.

You might be thinking: how does a tax credit like this work? Let’s imagine the bill passes as is, and you qualify for the $15,000 credit. When you file your tax return next year, you get your regular tax refund of, say, $1,700. Since you can claim the DASH tax credit, you would get an additional $15,000, meaning the total amount you’d receive when filing your taxes would be $16,700. 

Home buyer tax credits like these might not seem as helpful as something like upfront down payment assistance. But knowing that you’ll receive a sizable credit, later on, can give you the confidence to spend your savings on your down payment, closing costs, or other important expenses.

Again, this bill is still on the table and likely to change, but it shows that there’s a lot of encouragement geared toward turning renters into owners.

Another $15k through the First-Time Home Buyer Act of 2021

Introduced on April 26, 2021, the First-Time Home Buyer Act of 2021 aims to give qualifying first-time buyers another $15,000 in tax credits.

This refundable credit is similar to the DASH Act credit — meaning you’ll get up to $15,000 when you file your taxes, regardless of whether you are due a refund or owe a balance.

• Suppose you file taxes and receive a refund of $2,000. If you qualify for the full amount of this first-time buyer credit, you’ll receive an additional $15,000 for a total refund of $17,000 when filing your taxes.
• Suppose you file taxes and owe $3,000. If you qualify for the full amount of this credit, you’ll receive $15,000 toward this balance, which will cover your amount due and put another $12,000 in your pocket.

With this bill and others in Congress, lawmakers are turning their attention to helping home buyers. So what can you do? If you’re serious about buying, consider preparing for your journey by downloading our Path to Homeownership guide. It breaks down what makes up a mortgage, common myths about credit scores, and what steps go into the home financing process.

Put more money in your pocket on your first home purchase

You don’t want to miss out on these home buyer tax credits. But before you can start thinking about all these financial benefits, you need to get preapproved. Get in touch with Team Hadley to see how much home you can afford, and you’ll be on your way to putting extra money in your pocket.