December 18, 2024
What to know in 2024 #CashNews.co

What to know in 2024 #CashNews.co

Cash News

Editor’s note: We are monitoring government moves regarding the first-time home buyer tax credit and will update this page as necessary.

Although the first-time home buyer tax credit expired in 2010, the 2024 presidential campaign is sparking the discussion of new initiatives to help Americans buy a house as mortgage rates remain elevated.

In his State of the Union speech on March 7, 2024, President Joe Biden called on Congress to pass a tax credit for nearly $10,000 to first-time home buyers.

“I want to provide an annual tax credit that will give Americans $400 a month for the next two years as mortgage rates come down, to put toward their mortgage when they buy a first home or trade up for a little more space,” Biden said.

The White House says the credit would be “the equivalent of reducing the mortgage rate by more than 1.5 percentage points for two years on the median home.”

Biden is also hoping to unjam a housing market locked up by current homeowners clinging to their existing low-rate mortgages. He is pushing for legislation offering middle-class families a one-year, up to $10,000 tax credit if they sell their starter house valued below the county median.

Other initiatives the president has floated include:

  • $25,000 in down payment assistance to first-generation homebuyers “whose families haven’t benefited from the generational wealth building associated with homeownership.”

  • Eliminating title insurance on federally backed mortgages. The White House says it would save homeowners an average of $750 on a mortgage refinance.

  • Legislation to encourage the building and renovation of more than 2 million homes “to close the housing supply gap.”

Read more: How much house can I afford?

Democrats don’t have enough votes to pass a bill through both the House and the Senate without a measure of bipartisan support. And Republicans have had difficulty reaching a consensus on several issues.

That makes for a stiff challenge in advancing affordable housing initiatives in the months remaining to a hotly contested presidential election.

Potential home buyers looking for a break into homeownership should keep a close eye on developments.

The original first-time home buyer tax credit was created by Congress in 2008 and ended in 2010, though service members and some federal employees had an extra year’s eligibility for the tax credit.

Providing a tax rebate on income taxes owed, it allowed a credit of up to 10% of the purchase price on a principal residence to a maximum of $8,000.

The IRS defined a first-time home buyer as someone who had not owned a house in the three years before the purchase of the home the tax filer was seeking the tax credit on.

Read more: How to buy a house in 2024

With a federal tax break currently nonexistent, first-time home buyers can explore possible mortgage credit certificates in their state. MCCs are issued by state housing finance agencies and allow home buyers to take a portion of the mortgage interest they pay annually as a federal tax credit, up to a $2,000 limit.

The tax credit can range from 10% to 50% of the mortgage interest paid annually on a primary residence. MCCs are subject to income limits and other restrictions set by a state housing finance agency and primarily serve low- to moderate-income households. Once approved, the home buyer receives a credit certificate applied to federal income tax owed on their tax return.

Find information on the housing finance agency in your state.

Some cities, counties and states also provide down payment assistance, reduced interest rates and grants to qualified first-time home buyers. State housing finance agencies and the Department of Housing and Urban Development can help you find these home-buying assistance programs. You can also search your local municipality’s website for programs where you live.

Income limits, location, credit score requirements, and other restrictions may apply to these grants, loans or down payment assistance programs.

Read more: Everything you need to know about state first-time home buyer programs

First-time home buyers are often eligible for loan programs tailored to their needs. One of the most important benefits includes lower down payments:

The best mortgage lenders will also help you find loan and assistance programs that you may qualify for.

While it is of no help in clearing the hurdle to homeownership, once you are settled in, you can look forward to long-held tax breaks still in effect.

The tax benefits include deductions on discount points and origination fees paid during the loan process, as well as a mortgage interest deduction and a tax deduction on the property taxes you pay as a homeowner. There are also tax incentives for energy-efficiency home improvements and more.