What is the first-time homebuyer tax credit and how does it work?

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The new version of the first-time home buyer tax credit has yet to pass Congress, but there are some tax breaks that homeowners can take advantage of today. (Shutterstock)

Buying a home for the first time can be difficult, especially if you don’t have any kind of information or guidance to get you started. As a first-time home buyer, it’s important to know how to reduce the cost of your home ownership, including potential tax breaks.

For example, do you know the first law of Homebuyer 2021? Pending passage by Congress, if passed, the bill would provide up to $15,000 in federal loans to first-time home buyers.

Read on to learn more about the first-time home buyer tax credit, along with tax credits you can take advantage of today.

If you are a first time home buyer, Credible can help find great loan rates.

What is the first home buyer tax credit?

FOR new home owner Already trying to adjust the cost of owning a house, the tax provides relief.

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“The first-time homebuyer tax credit lowers the amount of tax you have to pay on your tax return in the year you buy the home,” says Rachel Bennett, Orchard’s real estate agent. in Austin, Texas. This is the opposite of a tax deductionwhich reduces tax revenue.

The first home buyer loan was first introduced on 30 July 2007 (as part of the Housing and Economic Development Act 2008) and came into effect on 30 July 2008. buy a house.

At its inception, the first-time home buyer tax credit provided a tax credit of up to 10% of the home’s value to first-time home buyers. The maximum amount that can be claimed is $8,000. There were also other requirements that the buyers had to meet, including citizenship, income and residency. This tax credit ended in 2010.

What is the first law for home buyers in 2021?

On April 28, 2021, Congressman Earl Blumenauer introduced the First Home Buyers Act of 2021. If passed, the bill would provide a federal tax credit equal to the first home buyer tax credit of the year 2010 the bill.

“This national government program will provide a loan for 10% of the value of your home, up to $15,000, to eligible taxpayers,” said Bennett. “This proposal is still under review and needs to be signed into law by President Joe Biden before it becomes effective.”

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If you are looking for consider your loan optionsbe sure to visit Credible to compare loan rates and lenders.

Who qualifies for this tax credit?

Even if this isn’t your first home, you may still qualify for the first-time home buyer tax credit – once the law is passed.

“The First Homebuyer Act of 2021 includes first-time homebuyers as well as first-time homebuyers who have not owned a home for three years,” Bennett said.

However, as Bennett explains, income also plays a role in lending. “This bill will only support buyers whose income does not exceed 160% of the median household income in their area.”

The home must be your primary residence in the qualifying year to claim it, and must be purchased, as opposed to owned. In addition, you cannot claim the tax credit in other years, and you cannot sell the property in the year you are trying to claim the credit.

WHAT IS INCOME TAX? A guide for first time home buyers

Other tax credits homeowners should know about

There are many incentives and financing available to first-time buyers in different states. For example, many states offer down payment assistance programs for first-time home buyers with certain income limits.

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First time home buyers may be eligible for the following taxes:

  • Loan documents: The MCC program allows you to claim a federal tax credit for a portion of your mortgage interest each year. The exact amount you can claim on your taxes varies by state, but is usually between 20% and 40% of the total interest, up to $2,000.
  • Interest Deduction: As a homeowner, you can remove interest you pay your debts. You will need to itemize these deductions on your tax return, and these may be limited depending on when you took out the loan.
  • Effective Home Equity Loans: This incentive gives you a federal tax credit if you have installed energy efficient appliances in your home. Equipment that qualifies for residential energy credits includes geothermal heat systems, wind turbines, solar panels and fuel cell properties. The loan is equal to a percentage of the cost of the equipment and varies depending on when you have installed it.

Learn more about your loan options by visiting Credible. You can compare lenders and loan rates to find the right loan for you.

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