President Joe Biden’s First-Time Homebuyer Act of 2021 promises a tax credit worth up to $15,00 for first-time buyers in the United States. Representatives Jimmy Panetta and Earl Blumenauer presented the act to the House in late April 2021.
The act will help low and middle-income Americans enter homeownership during a time where the market is soaring higher and more competitive than ever before. The act also fulfills one of the President’s key campaign promises to make homeownership accessible to renters who seek it for themselves and their families, especially in historically marginalized communities.
What is a Homebuyer Tax Credit?
It’s important to know that homebuyer tax credits are not a loan to be repaid nor a cash grant. The tax credit is applied directly to your federal tax bill.
According to homebuyer.com, married households who file their taxes separately may claim half of the available credit, non-married buyers may claim their proportional share of the credit.
Assuming a 2 percent inflation rate, the maximum first-time homebuyer credit would increase over the next five years:
- 2021: Maximum tax credit of $15,000
- 2022: Maximum tax credit of $15,300
- 2023: Maximum tax credit of $15,606
- 2024: Maximum tax credit of $15,918
- 2025: Maximum tax credit of $16,236
How is the 2021 First-Time Homebuyer Act different from the one in 2008?
In 2008, the federal government under President Barack Obama offered first-time homebuyers a tax credit of $7,500 in 2008 and eventually $8,000 in 2009 and 2010 with the Housing and Economic Recovery Act (HERA). Obama’s acts were created amidst the 2008 housing market crash. Unlike the housing market in 2008, Biden’s act comes in during a massive housing market bubble – that’s doesn’t appear to be crashing anytime soon.
The difference is not only the amount of tax credit but also that people who received credit in 2008 were required to pay the credit back over time.
What are the requirements for Biden’s Tax Credit?
To be eligible, a person must be a first-time homebuyer or not have owned/purchased a home in the past three years. Their incomes must also be at or below 160% of their area’s median income in addition they must be purchasing the home at or below 110% of their area’s median purchase price.
You must also be 18 years or older.
Downpayment Toward Equity Act of 2021
The Downpayment Toward Equity Act and First-Time Homebuyer Act of 2021 are the first steps towards sustainable development and solving our nation’s housing crisis. Separate from the First-Time Home Buyer Act, another act is in the works to help individuals achieve homeownership.
The Downpayment Toward Equity Act of 2021 promises to give Americans direct financial assistance to help them buy quality housing by providing $25,000 in cash to purchase a new home. The bill states its goal is to provide down payment assistance to first-generation home buyers to address multi-generational inequities in access to homeownership, and narrow and ultimately close the racial homeownership gap in the United States, and for other purposes.
Who is eligible?
People eligible for the Downpayment Toward Equity Act must be:
- First-time home buyers
- First-generation home buyers, or have lived in foster care
- Earned income that’s above-average for an area, at most
- Use Fannie Mae, Freddie Mac, FHA, VA, or USDA loans
To learn more about the rules and regulations regarding the Downpayment Toward Equity Act, read the bill in its entirety here.
The Future of Homeownership
Fair housing is something we care about greatly at 828 Real Estate. We’re always here to help first-time homebuyers find where to start in the buying process. The future of homeownership is now!