Current:Home > ContactPresident Biden wants to give homebuyers a $10,000 tax credit. Here's who would qualify. -ProfitPioneers Hub
President Biden wants to give homebuyers a $10,000 tax credit. Here's who would qualify.
View
Date:2025-04-18 22:18:43
Buying a home has become increasingly out of reach for Americans, who are grappling with a double whammy of high interest rates and surging home values. In his State of the Union address on Thursday, President Joe Biden proposed a new tax credit that would provide $10,000 to first-time home buyers.
Biden is also proposing a separate $10,000 tax credit for current homeowners who sell their "starter home" in order to jump into a bigger house. That could help melt a real estate market in which homeowners who locked in low mortgage rates during the pandemic and are hesitant to move because they now face significantly higher mortgage rates.
Biden's proposals — which must be enacted by Congress — were cheered by advocates of affordable housing, with National Housing Council CEO David M. Dworkin calling it "the most consequential State of the Union address on housing in more than 50 years." On a practical level, the tax credits would lower the cost of purchasing a home, an issue that affects Americans of all ages and stripes.
"Housing affordability has become a key issue for Americans spanning all demographics and political divides, and housing policy has mostly remained steady in recent congressional budgets," noted Moody's associate economist Nick Luettke in a report touching on Biden's efforts.
Here's what to know about the proposals.
What are Biden's homebuying tax credits?
Biden is proposing two tax credits aimed at helping Americans buy homes at a time when housing affordability is near an all-time low.
Currently, Americans must earn a six-figure salary to comfortably buy a typical home, compared with $59,000 just four years ago. Home prices have surged about 27% since the start of the pandemic, while mortgage rates have spiked, making it costlier to purchase.
To help offset the cost of buying a home, Biden is proposing the following tax credits:
- A first-time homebuyer tax credit of $10,000
- A one-year tax credit of up to $10,000 to current homeowners who sell their starter homes
The tax credits are viewed as a bridge to help people afford a home while mortgage rates are high. As a result, they wouldn't be permanent, but instead would be offered for homebuyers who purchase properties in 2024 or 2025, a senior Biden administration official told CBS MoneyWatch.
The Federal Reserve is expected to cut its key interest rate later this year, which would ease the cost of borrowing for all types of loans, from mortgages to credit cards.
Who would qualify for the tax credits?
First-time homebuyers would qualify for an annual tax credit of $5,000 per year for two years, for a total of $10,000.
The one-year tax credit for current homeowners would be available to people who own starter homes, defined as homes below the median home price in their county. The owners would have to sell to another owner-occupant, rather than an investor, according to the White House.
Both tax credits are geared toward "middle-class families," with the Biden administration official telling CBS MoneyWatch that the credits would be limited to households earning less than $200,000.
How would the tax credits impact the housing market?
The Biden administration said the tax credits would help unfreeze the real estate market and make homebuying more affordable for millions.
The first-time buyer tax credit could help 3.5 million middle-class families buy their first home, with the tax credit providing an equivalent reduction of about 1.5 percentage point for two years on the median-priced home, the White House said in a statement. The homeowner tax credit would help about 3 million families buy a bigger home, it added.
"Many homeowners have lower rates on their mortgages than current rates," the White House said. "This 'lock-in' effect makes homeowners more reluctant to sell and give up that low rate, even in circumstances where their current homes no longer fit their household needs."
When would these tax credits go into effect?
That's unclear, because Congress would need to pass legislation to change the tax code — an uphill climb as Democrats and Republicans spar ahead of the November election.
Passing tax credits could be "a particularly arduous task in an election year – though their inclusion in the address underscores the salience of the skyrocketing cost of housing for Americans nationwide," noted Luettke of Moody's.
The White House wants to see Congress pass legislation to enact the tax credits this year, which would allow homebuyers and homeowners to receive the tax credits starting in the 2024 tax year. Homebuyers would receive the credit for a two-year period that they could claim on their tax returns starting with either the 2024 or 2025 tax year, the Biden official said.
- In:
- Joe Biden
- Real Estate
- Taxes
Aimee Picchi is the associate managing editor for CBS MoneyWatch, where she covers business and personal finance. She previously worked at Bloomberg News and has written for national news outlets including USA Today and Consumer Reports.
TwitterveryGood! (6)
Related
- PHOTO COLLECTION: AP Top Photos of the Day Wednesday August 7, 2024
- Paul Mescal, Pedro Pascal go into bloody battle in epic first 'Gladiator 2' footage
- $50K Olympic track prize the latest in a long, conflicted relationship between athletes and money
- What American Crime Story: The People v. O.J. Simpson Got Right and Wrong About His Life
- Kehlani Responds to Hurtful Accusation She’s in a Cult
- Rashee Rice didn't have to be a warning for NFL players. The Chiefs WR became one anyway.
- Coast Guard, Navy rescue 3 stranded men after spotting 'HELP' sign made with palm leaves
- Congress is already gearing up for the next government funding fight. Will this time be any different?
- Video shows dog chewing cellphone battery pack, igniting fire in Oklahoma home
- Melrose Place Reboot Starring Heather Locklear, Laura Leighton and Daphne Zuniga Is in the Works
Ranking
- Kansas City Chiefs CEO's Daughter Ava Hunt Hospitalized After Falling Down a Mountain
- Taylor Swift has long been inspired by great poets. Will she make this the year of poetry?
- Billy Joel was happy to 'hang out' with Taylor Swift and Ed Sheeran, talks 100th MSG show
- TikTok’s Conjoined Twins Carmen and Lupita Slam “Disingenuous” Comments About Their Lives
- A Mississippi company is sentenced for mislabeling cheap seafood as premium local fish
- Judge dismisses lawsuits filed against rapper Drake over deadly Astroworld concert
- QB Shedeur Sanders attends first in-person lecture at Colorado after more than a year
- Greg Norman shows up at Augusta National to support LIV golfers at Masters
Recommendation
Olympic men's basketball bracket: Results of the 5x5 tournament
Pennsylvania flooded by applications for student-teacher stipends in bid to end teacher shortage
Prince Harry and Duchess Meghan announce two new Netflix series, including a lifestyle show
55 Coast Guard Academy cadets disciplined over homework cheating accusations
Whoopi Goldberg is delightfully vile as Miss Hannigan in ‘Annie’ stage return
Lawsuit settled: 2 top US gun parts makers agree to temporarily halt sales in Philadelphia
New website includes resources to help in aftermath of Maryland bridge collapse
TSA found more than 1,500 guns at airport checkpoints during 1st quarter of 2024, agency says