Promoting a fairer U.S. tax code was a theme in President Biden’s State of the Union address delivered before a joint session of Congress Thursday night. In addition to proposals to increase the corporate minimum tax rate for corporations, increase taxes on billionaires, and focus on Medicare and Social Security, Biden called for new tax credits to effectively lower mortgage rates and make home ownership more affordable.
“For many Americans, owning a home is the cornerstone of raising a family, building wealth, and joining the middle class. Too many working families feel locked out of homeownership and are unable to compete with investors for a limited supply of affordable for-sale homes,” the White House stated in a release.
Here’s more of what you need to know about Biden's proposals for homebuyers.
Biden homebuyer $400 tax credit
In his State of the Union (SOTU) address on March 7, President Biden proposed a series of initiatives to provide relief and assistance to potential homebuyers, particularly those in the middle class and first-generation homeowners. If eventually passed by Congress, these initiatives could impact the housing market and help some families achieve their dream of homeownership.
“I want to provide an annual tax credit that will give Americans $400 a month for the next two years as mortgage rates come down to put toward their mortgage when they buy a first home or trade up for a little more space,” Biden said.
One of the key proposals is the Mortgage Relief Credit. This credit would target middle-class first-time homebuyers.
- Under this plan, according to the White House, eligible buyers could receive an annual tax credit of $5,000 for two years.
- The credit would reduce the mortgage rate on the median home by more than 1.5 percentage points for two years.
- The Biden administration estimates that over 3.5 million middle-class families could benefit from the credit if passed.
Additionally, President Biden proposed incentives to encourage current homeowners to sell their starter homes. The administration notes that homeowners are sometimes reluctant to sell due to the low mortgage rates they may have, even if their current homes no longer suit their needs.
- Biden called on Congress to provide a one-year tax credit of up to $10,000 to middle-class families who sell their starter homes to another owner-occupant.
- The administration says nearly 3 million families could benefit from this initiative.
Biden first time homebuyer assistance
Biden also proposed providing down payment assistance for first-generation homebuyers and families that haven’t benefited from the generational wealth associated with homeownership.
- The proposed assistance could provide up to $25,000 in down payment support to eligible buyers, which the Biden administration says could help 400,000 families purchase their first home and break into the housing market.
During the SOTU address, the President also advocated for getting rid of “junk fees,” saying, “My administration is also eliminating title insurance fees for federally backed mortgages. When you refinance your home, this can save you $1,000 or more.”
Biden tax credit proposals: Bottom line
These proposed measures could make homeownership more attainable for some middle-class families and first-generation homebuyers. However, given the upcoming election and deep divides in Congress, whether these or other Biden tax proposals eventually gain traction and become law remains to be seen.
In the meantime, eligible homeowners can take advantage of some federal tax credits and deductions. These include options such as using retirement account funds for a downpayment, the mortgage interest deduction, deductions for mortgage points and property taxes, the capital gains tax exclusion for a primary home, and tax credits for energy-efficient home improvements.
Some states also offer incentives and programs for first-time homebuyers. Check with your state’s housing department for information.
