Can I Still Get the First-Time Homebuyer Tax Credit?

What Is the First-Time Homebuyer Tax Credit?

The first-time homebuyer tax credit provided up to $8,000 in federal tax credits for qualifying taxpayers who purchased their first homes between April of 2008 and June of 2010. The first-time homebuyer tax credit was intended to boost home sales and help stabilize the housing market following the 2008 financial crisis. The credit expired in 2010.

How Did the First-Time Homebuyer Tax Credit Work?

The first-time homebuyer tax credit gave a refundable tax credit to buyers who had not owned a principal residence for the last three years. The home had to be located within the U.S. and serve as the buyer's principal residence. It could not be a gift or inheritance, and the buyer had to own the home for at least 36 months after the date of purchase. This tax credit was refundable, meaning that taxpayers received its full value ($7,500 to $8,000 depending on when it was claimed) even if their tax bill was less than the credit amount.

Learn more: Refundable vs. Nonrefundable Tax Credits

Current Tax Deductions for First-Time Homebuyers

The first-time homebuyers tax credit expired in 2010, but there are still enough current federal tax breaks to make your first tax season as a homeowner interesting. Although tax deductions don't lower your tax bill as efficiently as tax credits (tax deductions lower your taxable income; tax credits lower your tax bill directly), there are several common homeowner tax deductions that can provide a bit of relief if you itemize deductions on your tax return.

Here are a few deductions worth considering:

• Property taxes: If you itemize deductions on your federal tax return, you can deduct up to $10,000 ($5,000 if married filing separately) of state and local taxes, including property taxes.
• Mortgage interest: Taxpayers who itemize can also deduct the interest on up to $750,000 ($375,000 if married filing separately) in mortgage debt on their federal taxes.
• Prepaid points: If you paid discount points on your mortgage in exchange for a lower interest rate, those points may be tax deductible. In most cases, the deduction for discount points is spread over the life of the loan.
• Medically necessary home improvements: You can't deduct the cost of regular home repairs or renovations, but you may be able to deduct home improvements made to help you live with a medical condition or disability—or example, building a ramp for a wheelchair. These improvements count as deductible medical expenses.
• Home office expenses: Only self-employed people who work from home are eligible. If this describes you, you may be able to deduct a portion of your home-related costs as a business expense.

Learn more: Tax Breaks for Homeowners

Additional Savings for First-Time Homebuyers

First-time homebuyers can also take advantage of loan programs, down payment assistance, employer-based help and even special grants designed to make homeownership more affordable. If you need a little extra help, here are some resources to seek out:

• Government-backed mortgages: Federal Housing Administration (FHA) loans, Veterans Affairs (VA) loans and U.S. Department of Agriculture (USDA) loans are insured by the government, which makes them less risky for lenders. As a result, first-time homebuyers may find government-backed loans with lower interest rates, more forgiving rules on borrowing, and low or no down payment requirements.
• Low-down-payment and low-interest mortgages: Some conventional mortgages, such as Fannie Mae's Standard 97 loan, require as little as 3% down, or may offer discounted mortgage interest rates to make monthly payments more affordable.
• Down payment assistance loans: Separate loans are available to help with your down payment. Deferred payment loans, low-interest loans and forgivable loans can help you cover—and pay off—your down payment separately from your regular mortgage.
• State and local loans and grants: Check for state and local programs that offer loans or grants to help with closing costs, a down payment or repairs and renovations to your home. Unlike loans, grants don't have to be repaid.
• Mortgage credit certificates: A mortgage credit certificate allows you to claim a federal tax credit based on the amount of mortgage interest you pay. Look for a lender that participates in your state or local Mortgage Credit Certificate (MCC) program for eligibility requirements and details.
• Employer-based homeowner assistance: These programs may provide help with down payment or closing costs. The Good Neighbor Next Door program, for example, gives qualifying homebuyers access to discounted home listings in nearby revitalization areas.

Learn more: First-Time Homebuyers: How to Qualify for Loans, Programs and Grants

The Bottom Line

If you're looking for ways to make your first home more affordable (and who wouldn't?), checking out state and local assistance programs and government-backed lending options may help you find the leg up you need. Once you've made your purchase, spending a little extra time during tax season reviewing your deductions might be a good investment as well.

You may also find it helpful to check your FICO^® Score^☉ and credit report for free from Experian when you're shopping for a loan. Lenders often reserve their best rates and terms for applicants with excellent credit. Knowing where your credit stands can help you choose a loan wisely.