The Biden $15k First-Time Homebuyer Tax Credit: Explained

Thanks to the Tax Cuts and Jobs Act of 2017, you can only deduct up to $10,000 combined from your property taxes and state and local income taxes. Before 2017, your entire amount of property taxes was deductible. They directly reduce the amount of taxes you owe, and you can usually get those credits whether or not you itemize deductions. In 2020 and 2021, the share of Free File users had increased over previous years — to 2.8% and 3.1%, respectively. That increase could’ve been due in part to the very public push to get filers and nonfilers alike on record and eligible for Economic Impact Payments as part of COVID-19 pandemic relief. The tool created to help facilitate the delivery of those payments was built in cooperation with the Free File program.

1. An examination of 2022 IRS data, the most recent available, reveals that despite 70% qualifying, just 2.2% actually took advantage of the program.
2. The major drawback to these loans is mandatory mortgage insurance, paid annually and upfront at closing.
3. Visit our Q&A if you’re looking for information on how to replay the 2008 First-Time Homebuyer Credit.
4. Mortgage certificate credit rates vary based on states and can range between 10% and 50% up to a maximum credit of $2,000.

You might also want to make significant renovations or repairs to the house before you actually move in. Make sure that you budget for these costs when buying a home. In such a competitive market, you’ll find it almost impossible to get your offer taken seriously unless you have a mortgage preapproval (unless, of course, you’re able to make an all-cash offer ). That’s because sellers won’t want to take a risk on someone who isn’t even certain they can get financing — especially when they have many other offers on the table. Even if you’re lacking forms, you can begin right now on TurboTax because it automatically saves your progress.

Is this program the same as the Biden First-Time Homebuyer Act?

Maybe cutting it close is one of many tiny ways you rage against the machine. So long as you avoid late payment penalties, you’re golden. The AI assistant, dubbed Intuit Assist, is far from a game-changer. On a one-through-five scale, I’d rate it a three for helpfulness. Home-office deductions aren’t available to remote employees of companies.

You’ll likely receive the tax information about the sale of your home in a 1099-S form, and you’ll report your ultimate gain — with that $500,000/$250,000 exclusion — on IRS Form 8949. If you don’t receive a 1099-S form and your profit on the house is less than the exclusion, you don’t need to report the sale on your taxes at all. The energy-efficient home improvement credit, also known as the nonbusiness energy property credit, is then split into two categories — “residential energy property costs” and “qualified energy efficiency improvements.” Local and state real estate taxes, more commonly called property taxes, can be deducted from your taxes, but at a far lower amount than before 2017. For more on taxes, learn about the biggest tax credits and how to create an online IRS account. The IRS is also offering free tax filing through Direct File for eligible taxpayers in 12 states this year.

Homeowners who have received a Mortgage Credit Certificate from a state or local government — usually acquired via a mortgage lender — can get a percentage of their mortgage interest payments back as a tax credit. Mortgage certificate credit rates vary based on states and can range between 10% and 50% up to a maximum credit of $2,000. If you file married separately, you can deduct half those amounts — $375,000 or $500,000, respectively. You know that you can get an income tax deduction on the mortgage interest you pay. But there are other tax deductions you can take on your principal residence or second home — such as property taxes.

Cash App users can file taxes free through the app; it doesn’t attempt to upsell you. Plus, the IRS is rolling out Direct File in some states, 100% free. Homeowners who use any part of their house, apartment or condo “exclusively and regularly” for their own business or side gig can claim home business expenses using IRS Form 8829.

Did The First-Time Homebuyer Act Pass Yet?

The needs of today’s buyers are different compared to the Obama-era program. The program modifies tax code leftover from the 2009 Obama-era $8,000 First-Time Homebuyer Tax Credit, which more than 2.6 million renters used to buy their first https://turbo-tax.org/ home. Direct assistance for first-time buyers weaves throughout each of these themes. Congress introduced the First-Time Homebuyer Act on April 28, 2021, to make homeownership more affordable for low- and middle-income Americans.

For more on income taxes, learn how to create an online IRS account. All Americans receive this tax exclusion regardless of their age and how many times they’ve benefited from it before. Note that the residence requirements apply whether you own the home or not.

Should I Itemize Tax Deductions on My Taxes?

This homeowner tax tip is most effective if you are a first-time homeowner, which is generously defined as not living in a home that you’ve owned for the past three years. If you’re buying your first home, be sure to ask your lender or mortgage broker to see if you qualify for an MCC. Discount points can save you big money on a 30-year mortgage by lowering the total interest you’ll have to pay across decades, but they can also save you money on your taxes when you buy them. The IRS considers mortgage points to be prepaid turbotax first time home buyer interest, so you can add the amount paid for points to your total mortgage interest that’s entered on Line 8 of 1040 Schedule A. At the time, these providers were members of the Free File Alliance, the name given to the group of online tax software companies authorized by the IRS to provide Free File services via the IRS website. But in the wake of the New York DFS investigation, ProPublica reporting and the 2020 Treasury Inspector survey, the IRS tightened its regulations and oversight of these companies.

With the recent interest rate hike, you may see an increase in the mortgage interest you pay. An increase in your monthly mortgage payment may not be ideal, but remember that you can deduct your mortgage interest at tax-time, lowering your taxes. Any first home purchased as your principal residence and located within the United States qualified for this refundable tax credit between April 8, 2008 and May 1, 2010.

The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters. Despite all of the tax breaks available for homeowners, there are some home-related expenses that can’t be deducted from your income. If you’ve put in a new roof, replaced a furnace, refinished floors or even landscaped the garden, be sure to include those costs to increase your adjusted basis and reduce the amount of your capital gains on the sale. The residential clean energy credit can give you 30% back on any money you spent installing solar electricity, solar water heating, wind energy, geothermal heat pumps, biomass fuel systems or fuel cell property. The only limit is for fuel cell property — $500 for each half a kilowatt of capacity. Money that you spent on mortgage interest or energy-efficient repairs can come back to you at tax time.

As a new homeowner, be sure you include the points you may have paid on your new mortgage as a deduction. Points is the fee you paid at closing to “buy” your interest rate down. Since you are effectively pre-paying interest, the IRS allows you to consider this as a deduction.

To speak to the bot, click “Help” in the top-right corner of the desktop platform. If it doesn’t know the answer, it will direct you to the TurboTax community forums or offer expert (human) help. TurboTax offers a 24/7 chatbot that answers your tax-related questions.

If so, that amount will be shown on your settlement sheet. Note that you can’t deduct the monthly payments into your escrow account as real estate taxes. Your deposits are simply money put aside to cover future tax payments. You can deduct only the actual real estate tax amounts paid out of the account during the year.

Last year, it took me a few hours to submit all my taxes through the platform, despite it being my first time. Business-related purchases may count toward your deductions. TurboTax will calculate whether you should use itemized deductions or the Standard Deduction to lower your taxable income as much as possible.