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Kamala Harris proposes tax credit for first-time home buyers. What about Trump?

Yahoo Personal Finance· Getty Images
Updated 3 min read

Editor’s note: We are monitoring government moves regarding the first-time home buyer tax credit and will update this page as necessary.

Democratic presidential nominee Kamala Harris said that if elected, her administration will provide first-time home buyers $25,000 to help with the down payment on a new home. It's the latest incentive being floated to transition the housing industry into a recovery.

The original first-time home buyer tax credit expired in 2010; however, the 2024 presidential campaign is sparking discussion of new initiatives to help Americans buy houses.

Mortgage rates have eased in recent months. With speculation high that the Federal Reserve will lower interest rates next month, the housing market may be poised to rebound. The Harris economic plan aims to keep the economy strong while continuing to ease inflation.

Read more: How much house can I afford?

Republican Donald Trump has not specifically hinted at a first-time home buyer tax credit as being among his plans to boost affordable homeownership.

However, the Republican 2024 platform states that tax incentives and other support for first-time home buyers — as well as opening portions of Federal Lands to new construction while reducing regulations — would boost home construction and ownership.

The Republican roadmap also said that "slashing inflation" would reduce mortgage rates.

Read more: How much house can I afford?

The original first-time home buyer tax credit was created by Congress in 2008 and ended in 2010, though service members and some federal employees had an extra year's eligibility for the tax credit.

Providing a tax rebate on income taxes owed, it allowed a credit of up to 10% of the purchase price on a principal residence to a maximum of $8,000.

The IRS defined a first-time home buyer as someone who had not owned a house in the three years before the purchase of the home the tax filer was seeking the tax credit on.

Read more: How to buy a house in 2024

With a federal tax break currently nonexistent, first-time home buyers can explore possible mortgage credit certificates in their state. MCCs are issued by state housing finance agencies and allow home buyers to take a portion of the mortgage interest they pay annually as a federal tax credit, up to a $2,000 limit.

The tax credit can range from 10% to 50% of the mortgage interest paid annually on a primary residence. MCCs are subject to income limits and other restrictions set by a state housing finance agency and primarily serve low- to moderate-income households. Once approved, the home buyer receives a credit certificate applied to federal income tax owed on their tax return.

Find information on the housing finance agency in your state.

Some cities, counties, and states also provide down payment assistance, reduced interest rates and grants to qualified first-time home buyers. State housing finance agencies and the Department of Housing and Urban Development can help you find these home-buying assistance programs. You can also search your local municipality's website for programs where you live.

Income limits, location, credit score requirements, and other restrictions may apply to these grants, loans or down payment assistance programs.

Read more: Everything you need to know about state first-time home buyer programs

First-time home buyers are often eligible for loan programs tailored to their needs. One of the most important benefits includes lower down payments:

The best mortgage lenders will also help you find loan and assistance programs that you may qualify for.

While it is of no help in clearing the hurdle to homeownership, once you are settled in, you can look forward to long-held tax breaks still in effect.

The tax benefits include deductions on discount points and origination fees paid during the loan process, as well as a mortgage interest deduction and a tax deduction on the property taxes you pay as a homeowner. There are also tax incentives for energy-efficiency home improvements and more.