What happened to the first-time homebuyer credit
Congress created the credit in 2008 under 26 U.S.C. §36 and changed it before it expired:
- Bought April 9 to December 31, 2008: up to $7,500, in effect an interest-free loan repaid over 15 years.
- Bought in 2009 or 2010: up to $8,000 (10% of the price), repaid only if the home stopped being your main home within 36 months.
- Long-time owners buying a new main home could claim up to $6,500 under the later rules.
- The deadline: purchases before May 1, 2010, or before October 1, 2010 with a binding contract signed by April 30. Members of the uniformed services and some federal employees on extended duty abroad got an extra year.
Repaying the 2008 credit
The 2008 version was repaid in equal installments of 6⅔% a year over 15 years, starting with 2010 tax returns. That period ran through 2024 returns, so no installments are due for 2025 or later.
Credits for 2009 and 2010 purchases only had to be repaid if the home stopped being your main home within 36 months of the purchase, a window that has long since closed.
Proposed credits in Congress
Bills to bring back a buyer credit have been introduced, but none has become law. The Bipartisan American Homeownership Opportunity Act of 2025 (H.R. 3475), introduced May 17, 2025 and sent to the Ways and Means Committee, would give first-time buyers a credit equal to their down payment, up to $50,000.
Its credit would phase out above $150,000 of modified adjusted gross income ($225,000 for heads of household, $300,000 for joint filers). If you see an ad for a first-time buyer tax credit, check whether it describes a bill or a program you can actually use.
Tax breaks you can use in 2026
None of these is a buyer credit, but together they are what the tax code offers a first-time buyer today:
- Mortgage credit certificate: a credit of 10% to 50% of your mortgage interest every year (capped at $2,000 above 20%), if your state or county issues one and you apply before closing. 10 state agencies issue them; see the MCC list by state.
- Mortgage interest deduction: interest on up to $750,000 of debt used to buy, build or improve your home ($375,000 if married filing separately), if you itemize.
- Mortgage insurance premiums: deductible again on 2026 returns for itemizers. The deduction shrinks once AGI tops $100,000 and ends above $109,000 (half those figures if married filing separately).
- Points: on a loan to buy your main home, points can often be deducted in full the year you pay them, if you itemize and meet the IRS tests.
- IRA withdrawal: up to $10,000 over your lifetime from an IRA toward a first home, without the 10% early-withdrawal penalty. "First-time" here means no main home in the past 2 years, and the money must be spent within 120 days.
Down payment assistance isn't a tax break, but it lowers the cash you need at closing: state housing agencies run 92 programs, compared in our first-time home buyer programs by state.
Why a credit is worth more than a deduction
A deduction lowers your taxable income, so it saves only your tax bracket's share, and only if your itemized deductions beat the standard deduction. A credit comes straight off your tax.
In the 12% bracket, $10,000 of extra deductions saves at most $1,200, while a $2,000 MCC credit saves $2,000. If you take the standard deduction, the mortgage-interest deduction saves nothing at all, but the credit still counts.