Current:Home > ScamsPresident Biden wants to give homebuyers a $10,000 tax credit. Here's who would qualify. -Infinite Edge Capital
President Biden wants to give homebuyers a $10,000 tax credit. Here's who would qualify.
View
Date:2025-04-15 22:42:49
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! (598)
Related
- Civic engagement nonprofits say democracy needs support in between big elections. Do funders agree?
- T20 World Cup 2024: Tournament director says cricket matches will be 'very, very exciting'
- Watch this missing cat come wandering home
- Two Navy SEALs drowned in the Arabian Sea. How the US charged foreign crew with smuggling weapons
- Meet first time Grammy nominee Charley Crockett
- California State University student workers vote to unionize, creating largest such union in country
- 1 dead, 3 injured following a fire at a Massachusetts house
- Alabama Senate OKs bill targeting college diversity efforts
- Tree trimmer dead after getting caught in wood chipper at Florida town hall
- Vice Media to lay off hundreds of workers as digital media outlets implode
Ranking
- Meta donates $1 million to Trump’s inauguration fund
- Watch this missing cat come wandering home
- Inside Travis Kelce's New Romantic Offseason With Taylor Swift
- Beyoncé's use of Black writers, musicians can open the door for others in country music
- How to watch the 'Blue Bloods' Season 14 finale: Final episode premiere date, cast
- Yankees' Alex Verdugo responds to scorching comments from ex-Red Sox star Jonathan Papelbon
- Georgia bill aims to protect religious liberty. Opponents say it’s a license to discriminate
- Tired of diesel fumes, these moms are pushing for electric school buses
Recommendation
Costco membership growth 'robust,' even amid fee increase: What to know about earnings release
Love Is Blind's Chelsea Reveals What She Said to Megan Fox After Controversial Comparison
An oil boom, a property slump and dental deflation
Vigil held for nonbinary Oklahoma teenager who died following a school bathroom fight
Pressure on a veteran and senator shows what’s next for those who oppose Trump
A search warrant reveals additional details about a nonbinary teen’s death in Oklahoma
Audrii Cunningham died from 'homicidal violence with blunt head trauma,' records show
Barry Keoghan Praises Sabrina Carpenter After She Performs Duet With Taylor Swift