Getting onto the property ladder isn’t easy. Especially when the property market is constantly fluctuating.
Buying your first home is a huge achievement, but it is by no means easy.
You have to save money and have proof that you can afford to pay for the house that you want to buy in order to obtain a mortgage.
Getting to a place where you are able to purchase a house is difficult, and that’s without even taking into account the time and effort required to find a house that you actually want.
In 2021, the Biden administration introduced the first-time homebuyer act which is essentially a bill that grants first time home buyers a tax credit.
This is designed to make buying your first home a little easier.
In this guide, we’ll be taking a look at what this tax credit is, and what you have to do to be eligible for it.
So if you want to find out more, keep on reading!
What Is A First Time Home Buyer?
First things first, let’s take a look at what makes somebody a first time home buyer. Well, this is pretty self-explanatory.
A first time home buyer is somebody who has purchased a home for the first time.
So, in order to qualify as a first time home buyer, it is required that you have never owned a home before.
If you have owned a home at any point in your life, then you will not be considered a first time home buyer.
However, the legal definition of a first time home buyer for the new bill announced by the Biden administration is a little different.
While most countries across the Globe only consider people who have never bought a home to be first time buyers, this bill is a little different.
To be considered a “first time home buyer”, and be eligible for the first time home buyer tax credit, you have to have not owned a home in the previous 36 months.
This also includes co-signing on a mortgage loan, and includes primary residences, second homes, and rentals for vacations.
But, from this terminology, it appears that you could qualify for this loan if you have owned a home in the past and sold it prior to the date 36 months before you apply for this tax credit.
Do First Time Home Buyers Get A Tax Credit?
Well, as we have established, the Biden administration announced the first-time homebuyer act in 2021.
However, at present, this bill has not been implemented, it has simply been announced.
This means that if you were to buy a home as a first time buyer, at the time of writing, then you wouldn’t actually be eligible for a tax credit.
Simply because this tax credit has not yet become available. However, in the future, yes, there will be a first time home buyer’s credit.
This credit is being implemented by the Biden administration in order to help historically marginalized groups get on the property market.
In short, this act has been announced to make home ownership more achievable and accessible to those who rent, which is one of the promises that led to Biden getting into power.
With that in mind, let’s take a deeper look at what this first time home buyer tax credit is.
What Is The First Time Home Buyer Tax Credit?
When it becomes available, the First Time Home Buyer Act will grant those who are eligible a large tax credit.
This tax credit is neither a loan nor a grant, instead it will be applied to your federal tax bracket.
The tax credit will be equal to 10% of the value of the home that you are purchasing (but will not exceed $15,000 in 2021 inflation-adjusted dollars).
If you are married and file your taxes separately from one another, then the credit can be split in half.
As we have said, this Act has not yet been passed into law, so it is yet to become available.
But, once it does, it will automatically be given to you if you are eligible.
There will be no need to fill out any tax forms to receive this tax credit, instead it will simply be given to you.
So that is one less piece of paperwork that you have to complete in order to buy a home.
But how do you know if you are eligible? Let’s take a look.
Eligibility For The First Time Home Buyer Tax Credit
From the small amount of information available about this tax credit scheme, it appears that you would be eligible for this loan if you meet all the following criteria.
Please note that this could change when the scheme comes into law:
Be A First Time Home Buyer
As we have mentioned, to qualify as a “first time home buyer”, you can’t have owned a home or co-signed on a mortgage loan for the past 36 months.
Be Using The Scheme For The First Time
If you have previously been eligible for the scheme, but the purchase on the home fell through, you might not be eligible for the scheme again.
Earn A Relatively Modest Income
Your annual income must be modest in relation to your area and the size of your household.
If you earn more than 60% above the median average for your area, you will not be eligible.
Be Over The Age Of 18
In order to qualify for the scheme you have to be over the age of 18 at the time of purchase and application.
Must Be Purchasing The Home From An Independent Seller
You will not be eligible for this tax credit if the house that you are purchasing was previously owned by a relative.
You must be buying off a non-relative.
In short, yes, there are plans to implement a first time home buyers tax credit as part of the Biden administration.
However, at current this is just a bill, and has not yet been passed into law.
So, until this becomes a law, there are currently no tax credits available to first time buyers.
Thank you for reading!