HR7160-119

What This Bill Does

The First Home Affordability Act rewrites Internal Revenue Code section 36 as a new first-time homebuyer credit. An eligible individual is a first-time homebuyer who buys a U.S. principal residence during the taxable year or the four preceding taxable years. The credit generally equals 10 percent of the purchase price divided across a five-year credit period, capped at $25,000 per purchase, with a $12,500 cap for married filing separately and allocation rules for unmarried co-buyers. The credit phases out above 150 percent of area median income over the next 20 percent of area median income and phases out for higher-priced homes based on area median purchase price. Buyers must be at least 18. Teachers, childcare workers, and first responders receive special treatment: the credit period is the purchase year and the applicable amount is 10 percent of the purchase price. The bill denies the credit for related-party purchases, dependent taxpayers, homes sold or no longer used as principal residences during the taxable year, and returns missing settlement statements. It includes reporting rules, recapture if the home is sold or ceases to be the principal residence during the credit period, exceptions for death, involuntary conversion, and certain transfers, joint-return rules, and return filing requirements. It also allows taxpayers to transfer the purchase-year credit to a registered mortgage lender, which must disclose credit value, provide the buyer the equivalent value in cash or down-payment support, preserve other incentives, and may receive Treasury advance payments; Treasury may revoke lender registration for noncompliance.

Who Benefits and How

First-time homebuyers benefit from a refundable credit that can reduce tax liability or be converted into closing-time cash or down-payment assistance. Lower- and moderate-income buyers below the area-median-income phaseout benefit most. Teachers, childcare workers, law-enforcement officers, firefighters, rescue-squad members, ambulance crew members, and 911 operators benefit from immediate purchase-year treatment instead of spreading the credit across five years. Mortgage lenders benefit if registered to receive transferred credits and Treasury advance payments. Home sellers and builders may benefit from increased first-time-buyer demand.

Who Bears the Burden and How

Federal revenue collections and taxpayers bear the cost of refundable credits and advance payments. The Internal Revenue Service and Treasury must issue regulations, administer income and purchase-price phaseouts, verify settlement statements, manage recapture, register mortgage lenders, monitor disclosures, and make advance payments. HUD must help Treasury determine area median income and area median purchase price guidance. Mortgage lenders that accept transfers must register, disclose values, provide equivalent buyer payments, preserve other incentives, track credits, and risk revocation for noncompliance. Buyers who sell too early or stop using the home as a principal residence can face recapture.

Key Provisions

• Creates a refundable first-time homebuyer credit under Internal Revenue Code section 36.
• Provides a credit equal to 10 percent of purchase price, generally spread over five taxable years and capped at $25,000 per purchase.
• Limits the credit through area-median-income and area-median-purchase-price phaseouts and an age-18 requirement.
• Provides immediate purchase-year treatment for eligible teachers, childcare workers, and first responders.
• Requires recapture when the residence is sold or stops being the principal residence during the credit period, with specified exceptions.
• Allows taxpayers to transfer the credit to registered mortgage lenders for cash or down-payment support at closing.