HR4717-119

What This Bill Does

The First-Time Homebuyer Tax Credit Act rewrites Internal Revenue Code section 36 to create a refundable credit for individuals buying a principal residence in the United States as first-time homebuyers. The credit equals 10 percent of the purchase price, capped at $15,000, with a $7,500 cap for married taxpayers filing separately and allocation rules when unmarried buyers purchase the same residence. The credit phases down when modified adjusted gross income exceeds 150 percent of the applicable area median income set by HUD for the residence location, household size, and purchase year, and it phases out over the next 20 percentage points of AMI. The home cannot cost more than 110 percent of the local conforming loan limit under the FHA-related mortgage limit rules, and no credit is allowed for homes acquired from related persons, inherited homes, gifts, or homes converted from a prior principal residence of the buyer or spouse. A first-time homebuyer generally must not have owned a principal residence during the prior three years, with special rules for displaced homemakers and single parents, and a disabled veteran exception under section 8(2) of the United States Housing Act of 1937. The residence must be occupied as a principal residence within 60 days after purchase, with delay exceptions for construction, destruction, military deployment, death, or other Treasury-specified circumstances. If the home stops being the taxpayer's principal residence or is sold before the end of the fourth taxable year after purchase, the taxpayer generally recaptures the credit, limited to gain on sale for dispositions and subject to exceptions for death, divorce transfers, involuntary conversion with timely replacement, and certain military orders. The bill requires settlement statements to include taxpayer identification numbers, property address, contract date, closing date, price, and other IRS-required information, and it directs IRS to issue regulations after consulting HUD. It applies to residences purchased after enactment and before January 1, 2030, with a transition rule for binding contracts signed before 2030 and closed before April 1, 2030.

Who Benefits and How

First-time homebuyers benefit from a refundable credit worth up to $15,000 toward a principal-residence purchase. Moderate-income households benefit because the income phaseout starts at 150 percent of HUD area median income rather than a national flat amount. Disabled veterans benefit from a special exception to the first-time-homebuyer limitation. Mortgage lenders and settlement agents benefit from clear reporting fields that support IRS administration of the credit. Homebuilders and sellers may benefit from added buyer purchasing power before the credit expires after 2029 purchases.

Who Bears the Burden and How

Treasury Secretary and IRS must write rules, administer refundability, enforce related-party and price-limit rules, and collect settlement reporting. HUD Secretary must provide area median income inputs and consult on regulations. Homebuyers who sell or stop using the property as a principal residence within four years may owe recapture tax. Settlement agents must report buyer taxpayer IDs, addresses, contract dates, closing dates, purchase prices, and other IRS-required information. Federal taxpayers bear the cost of refundable credits paid to eligible buyers.

Key Provisions

• Creates a refundable first-time-homebuyer tax credit equal to 10 percent of purchase price up to $15,000.
• Limits eligibility using HUD area median income phaseouts and a 110 percent local mortgage-limit price cap.
• Defines first-time homebuyer status, principal-residence occupancy, related-party exclusions, and disabled-veteran exceptions.
• Requires recapture when the home is sold or stops being the taxpayer's principal residence within four years, subject to exceptions.
• Requires settlement-statement reporting and applies the credit to purchases before 2030 with a transition closing rule.