If you're interested in learning more about this tax credit, you've come to the right place. We'll talk about the $15,000 First-Time Home Buyer Credit, how it works, and who can receive this funding. Let's jump in.
What Is the First-Time Homebuyer Act of 2021?
The First-Time Homebuyer Act of 2021 is a proposed law that would provide $15,000 in tax credits to first-time homebuyers who meet specific requirements. It aims to help lower and middle-class citizens ready to purchase their first home.
The bill works to help marginalized communities to access homeownership for the first time in their lives. It's part of Biden's promise to make owning homes more accessible for all types of people from all walks of life. It aims to give renters the chance to transition into owning homes.
There are a few criteria people must meet to receive the tax credit. We'll talk about these a little later to give you a better idea of the qualifications.
How Does Biden's Home Buyer Credit Work?
The first-time homebuyer credit works like any other tax credit. If you qualify, you receive the credit automatically on your yearly taxes. It's 10% of your home's price, so long as that number doesn't exceed $15,000. You cannot receive more than $15,000 as a tax credit.
This act does not provide a loan to be repaid, and it doesn't provide money to use. It's a break from taxes when making a large home investment.
If you're married and filing separately, you can claim half of the tax credit. Those who aren't married can claim their share of the tax credit. No one can access more than $15,000 as a relief.
The act isn't a law as of right now, so it could change in the future as it moves toward being put into action. Keep an eye on this tax credit as it evolves.
Who Can Receive the Credit?
To receive the $15,000 tax credit in Biden's First Time Homebuyer Act, you need to meet a few specific qualifications. This relief is aimed at lower and lower-middle-class groups. You will need to prove that you are in need and a first-time buyer to be considered. There are also a few more requirements.
To get the tax credit, you will need to be:
- At least eighteen years old
- Using a first-time buyer tax credit for the first time
- A first-time home buyer
- Be purchasing a home from someone who is not a relative
- Earning a modest income, based on location and household size
If you meet these requirements, you're eligible for the tax credit when it comes to fruition.
The $15,000 tax credit can be applied to your yearly taxes and take away extra payments that come with investing in a home. Of course, these requirements could change as the act moves toward becoming law. The act at this point is flexible.
How Do You Access the Credit?
Although many people will be eligible for the credit, it's not in circulation yet. You can't access the credit. However, once it passes into law, anyone who qualifies for the credit will be able to apply it to their taxes.
There are no official instructions for using the tax credit, but, likely, it will automatically apply to taxes without any further action. Those who receive the tax credit will receive more tax credit as inflation increases. If we assume a 2% inflation rate, a $15,000 tax credit will increase to $15,300 in the next year it goes into action.
What Happens If You Move?
If you decide to move within the first four years of moving into the home, you will need to pay back some tax credit. It's critical to consider how long you think you'll stay in this place before accepting the tax credit. If you plan to move after a year, you could be responsible for a large chunk of repayment.
Here are some of the specifics with repaying the credit:
- If you move within the first year, you pay $15,000 in taxes
- If you move within the second year, you pay $11,250 in taxes
- If you move within the third year, you pay $7,500 in taxes
- If you move within the fourth year, you pay $3,750 in taxes
The longer you stay, the less you repay if you move. If you live there for more than four years, you don't have to pay anything extra in taxes.
Before purchasing a home, it's best to determine if you think you'll stay there for at least four years. If not, plan on making additions to your taxes for the year you move out of the home.
Although the Biden first-time homebuyer tax credit is not in law yet, it's exciting to see it in motion in a place of law. There's a lot of potential in the future of homeownership for everyone.
Why Does It Matter?
The $15,000 first-time homebuyer tax credit matters because it helps the world come closer to housing equality. It's an incentive to push renters into homes they can invest and relax in. Biden's promise is a step towards giving folks who would otherwise not have access to homes access to places to buy.
It also matters because it can apply to any zoned residential property. You don't have to move anywhere specific for the tax credit to belong to you. All you need to do is qualify, and you can have help working towards a home of your own.
It's exciting to see a law like the First-Time Home Buyer Tax Act rolling into action. Although, as of January 5th, 2022, the act hasn't been passed yet, Biden and his allies are making a strong effort to get it signed into law, and it may very well become law in the not-too-distant future. All we can do is wait and see if it passes.