Getting your foot on the first rung of the real estate ladder can be costly. Your down payment and closing costs can add up to tens of thousands of dollars. And that’s before factoring in the price of any upgrades you need to make to your new home! Luckily help could be on the way in the form of the Homebuyer Tax Credit 2023. Read on to learn more about this bill and see if you’ll qualify for a tax credit if it gets passed into law.
What Is The Homebuyer Tax Credit 2023?
The Homebuyer Tax Credit 2023 (also known as the Biden $15k First-Time Homebuyer Tax Credit) is a bill that could potentially be passed into law. It’s based on the 2008 First-Time Home Buyer Tax Credit that gave eligible homebuyers a tax credit of up to $7,500.
If the bill is passed, you may qualify for a tax credit of as much as 10% of the purchase price of your home, up to $15,000 total. However, you would need to meet certain eligibility requirements:
- You’re a first-time homebuyer, which means you haven’t owned a home in the past 36 months.
- You’re purchasing a primary residence, not a second home or rental property.
- The proposed bill is designed to help low and middle-income buyers purchase their first home and start to build generational wealth. So your income must be no more than 60% higher than the median income in your area.
- You won’t qualify if you’re purchasing a home from a direct relative, such as a parent or grandparent.
Keep in mind that the Homebuyer Tax Credit 2023 is still a bill and may not pass. And if it does become law, the eligibility requirements could be different when it goes into effect.
How Does The Homebuyer Tax Credit 2023 Work?
The 2008 Homebuyer Credit required new homeowners to fill out an additional IRS form and submit it with their taxes. It’s expected that you will be able to claim the 2023 Homebuyer Tax Credit the same way if it passed.
If you meet the eligibility requirements and are approved, the credit will automatically be applied to your tax bill. If you owe less than the amount of the tax credit, you’ll receive the rest of the money via direct deposit. The bill is also expected to be retroactive to January 1, 2021, so eligible homeowners could file an amended tax return to receive their credit.
Unlike the 2008 Homebuyer Tax Credit, this one wouldn’t have to be paid back. However, if you sell your home or move out within four years, you may have to repay some or all of the tax credit. There are exceptions built into the bill for death, divorce, and military transfers. Additionally, if your real estate gains are less than the amount of your tax credit, you may only have to repay the money you made on the sale instead of the whole credit. But remember this is all hypothetical because this tax credit is still just a bill!
Other Ways to Save on Your Home Purchase
Unfortunately, the Homebuyer Tax Credit 2023 is in the bill stage and it’s possible it may never be passed. But luckily there are other ways to save on your first home purchase right now.
There may be first-time homebuyer tax credits available in your state. Many states also offer assistance programs to help homebuyers afford the cost of down payments and closing fees.
Additionally, the Mortgage Credit Certificate Program could allow you to claim a tax credit for a portion of the mortgage interest you pay each year. Plus, you can take up to $10,000 out of your IRA or Roth IRA without penalty to purchase your first home. You may even be able to get a discounted mortgage rate through a program like Home Possible.
There are options out there to help you get into your first home and climb the property ladder, so don’t be discouraged if the 2023 Homebuyer Tax Credit doesn’t get passed!
Where are you in the home buying process? Have you recently bought your first home or are you still looking for the perfect place? Let us know in the comments below!
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