First-time homebuyer refundable tax credit

(a)

In general

Section 36 of the Internal Revenue Code of 1986 is amended to read as follows:

36.

First-time homebuyer credit

(a)

Allowance of credit

In the case of an individual who is a first-time homebuyer of a principal residence in the United States during a taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to 10 percent of the purchase price of the residence.(b)

Limitations

(1)

Dollar limitation

(A)

In general

Except as otherwise provided in this paragraph, the credit allowed under subsection (a) shall not exceed $15,000.(B)

Married individuals filing separately

In the case of a married individual filing a separate return, subparagraph (A) shall be applied by substituting $7,500 for $15,000.(C)

Other individuals

If 2 or more individuals who are not married purchase a principal residence, the amount of the credit allowed under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe, except that the total amount of the credits allowed to all such individuals shall not exceed $15,000.(2)

Phaseout based on area median income

(A)

In general

The amount allowable as a credit under subsection (a) (determined without regard to this paragraph) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as—(i)the excess (if any) of—(I)the modified adjusted gross income of the taxpayer for the taxable year, over(II)150 percent of the applicable Area Medium Income, bears to(ii)20 percent of the applicable Area Median Income.(B)

Modified adjusted gross income

For purposes of subparagraph (A), the term modified adjusted gross income means the adjusted gross income of the taxpayer for the taxable year increased by any amount excluded from gross income under section 911, 931, or 933.(C)

Applicable Area Median Income

For purposes of subparagraph (A), the term applicable Area Median Income means the Area Median Income set by the Secretary of Housing and Urban Development with respect to—(i)the area in which the principal residence is located, (ii)the size of the household of the taxpayer, and(iii)the calendar year in which the principal residence is purchased.(D)

Regulations and guidance

The Secretary, after consultation with the Secretary of Housing and Urban Development, shall issue such regulations and guidance as are necessary to carry out the purposes of this subparagraph. (3)

Limitation based on area median purchase price

(A)

In general

The amount allowable as a credit under subsection (a) (determined without regard to this paragraph) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as—(i)the excess (if any) of—(I)the purchase price of the principal residence, over(II)the amount which is equal to 110 percent of the area median purchase price, bears to(ii)the amount which is equal to 15 percent of the area median purchase price. (B)

Area median purchase price

For purposes of this paragraph, the term area median purchase price means the median purchase price for a home in both the area and the calendar year in which the purchase of the principal residence takes place. (C)

Regulations and guidance

The Secretary, after consultation with the Secretary of Housing and Urban Development, shall promulgate such regulations and guidance as are necessary to carry out the purposes of this subparagraph, including for determining the area median purchase price with respect to different localities.(4)

Inflation adjustment

In the case of any taxable year beginning in a calendar year after 2024, each of the dollar amounts in paragraph (1) shall be increased by an amount equal to—(A)such dollar amount, multiplied by(B)the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2023 for calendar year 2016 in subparagraph (A)(ii) thereof.

Any increase determined under the preceding sentence shall be rounded to the nearest multiple of $100.

(5)

Age limitation

No credit shall be allowed under subsection (a) with respect to the purchase of any residence unless the taxpayer has attained age 18 as of the date of such purchase. In the case of any taxpayer who is married (within the meaning of section 7703), the taxpayer shall be treated as meeting the age requirement of the preceding sentence if the taxpayer or the taxpayer’s spouse meets such age requirement.(c)

Definitions

For purposes of this section—(1)

First-time homebuyer

The term first-time homebuyer means any individual if such individual (and if married, such individual’s spouse)—(A)has no present ownership interest in any residence during the 3–year period ending on the date of the purchase of the principal residence to which this section applies, and(B)has not taken the credit in any other taxable year.(2)

Principal residence

The term principal residence has the same meaning as when used in section 121.(3)

Purchase

(A)

In general

The term purchase means any acquisition, but only if—(i)the property is not acquired from a person related to the person acquiring such property (or, if married, such individual’s spouse),(ii)the acquisition is financed through a federally backed mortgage loan (as defined in section 4022 of the CARES Act), and(iii)the basis of the property in the hands of the person acquiring such property is not determined—(I)in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or(II)under section 1014(a) (relating to property acquired from a decedent).(B)

Construction

A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence.(4)

Purchase price

The term purchase price means the adjusted basis of the principal residence on the date such residence is purchased.(5)

Related persons

A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b).(d)

Exceptions

No credit under subsection (a) shall be allowed to any taxpayer for any taxable year with respect to the purchase of a residence if—(1)the taxpayer disposes of such residence (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) before the close of such taxable year,(2)a deduction under section 151 with respect to such taxpayer is allowable to another taxpayer for such taxable year, or(3)the taxpayer fails to attach to the return of tax for such taxable year a properly executed copy of the settlement statement used to complete such purchase.(e)

Reporting

If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045(e) shall not apply.(f)

Recapture of credit

(1)

In general

Except as otherwise provided in this subsection, if, during any taxable year before the close of the recapture period, a taxpayer disposes of the principal residence with respect to which a credit was allowed under subsection (a) (or such residence ceases to be the principal residence of the taxpayer), the tax imposed by this chapter for such taxable year shall be increased by the recoverable amount determined in paragraph (2).(2)

Recoverable amount

For purposes of paragraph (1), the recoverable amount is the product of—(A)25 percent of the amount of the credit allowed under subsection (a), multiplied by(B)the number of taxable years remaining in the recapture period as of the beginning of the taxable year in which the taxpayer disposes of the principal residence. (3)

Limitation based on gain

In the case of the sale of the principal residence to a person who is not related to the taxpayer, the increase in tax determined under paragraph (1) shall not exceed the amount of gain (if any) on such sale. Solely for purposes of the preceding sentence, the adjusted basis of such residence shall be reduced by the amount of the credit allowed under subsection (a).(4)

Exceptions

(A)

Death of a taxpayer

Paragraph (1) shall not apply to any taxable year ending after the date of the taxpayer’s death.(B)

Involuntary conversion

Paragraph (1) shall not apply in the case of a residence which is compulsorily or involuntarily converted (within the meaning of section 1033(a)) if the taxpayer acquires a new principal residence during the 2-year period beginning on the date of the disposition or cessation referred to in paragraph (1). Paragraph (1) shall apply to such new principal residence during the recapture period in the same manner as if such new principal residence were the converted residence.(C)

Transfers between spouses or incident to divorce

In the case of a transfer of a residence to which section 1041(a) applies—(i)paragraph (1) shall not apply to such transfer, and(ii)in the case of taxable years ending after such transfer, paragraph (1) shall apply to the transferee in the same manner as if such transferee were the transferor (and shall not apply to the transferor).(D)

Special rule for members of the armed forces, etc

(i)

In general

In the case of the disposition of a principal residence by an individual (or a cessation referred to in paragraph (1)) after December 31, 2021, in connection with Government orders received by such individual, or such individual’s spouse, for qualified official extended duty service, paragraph (1) and subsection (d)(2) shall not apply to such disposition (or cessation).(ii)

Qualified official extended duty service

For purposes of this section, the term qualified official extended duty service means service on qualified official extended duty as—(I)a member of the uniformed services,(II)a member of the Foreign Service of the United States, or(III)an employee of the intelligence community.(iii)

Definitions

Any term used in this subparagraph which is also used in paragraph (9) of section 121(d) shall have the same meaning as when used in such paragraph.(E)

Disposition of residence in connection with change of employment

In the case of the disposition of a principal residence by an individual (or a cessation referred to in paragraph (1)) after December 31, 2021 in connection with a change of employment which meets the conditions described in section 217(c), paragraph (1) shall not apply to such disposition (or cessation).(5)

Joint returns

In the case of a credit allowed under subsection (a) with respect to a joint return, half of such credit shall be treated as having been allowed to each individual filing such return for purposes of this subsection.(6)

Return requirement

If the tax imposed by this chapter for the taxable year is increased under this subsection, the taxpayer shall, notwithstanding section 6012, be required to file a return with respect to the taxes imposed under this subtitle.(7)

Recapture period

For purposes of this subsection, the term recapture period means the 4 taxable years beginning with the taxable year in which the purchase of the principal residence for which a credit is allowed under subsection (a) was made.(g)

Election To treat purchase in prior year

In the case of a purchase of a principal residence after December 31, 2022, a taxpayer may elect to treat such purchase as made on December 31 of the calendar year preceding such purchase for purposes of this section (other than subsections (b)(4), (c), and (h)).(h)

Transfer of credit

(1)

In general

Subject to such regulations and other guidance as the Secretary determines necessary, a taxpayer may elect that the credit which would (but for this subsection) be allowed to such taxpayer with respect to the purchase of a principal residence shall be allowed to the mortgage lender with respect to such purchase and not to such taxpayer.(2)

Eligible entity

For purposes of this subsection, the term eligible entity means, with respect to the purchase of the principal residence for which the credit is allowed under subsection (a), the mortgage lender which provides the mortgage to the taxpayer and has—(A)registered with the Secretary for purposes of this paragraph, at such time, and in such form and manner, as the Secretary may prescribe,(B)prior to the election described in paragraph (1) and not later than at the time of such purchase, disclosed to the taxpayer making such purchase—(i)the value of the credit allowed under subsection (a), and(ii)the amount provided by the mortgage lender to such taxpayer as a condition of the election described in paragraph (1).(C)not later than at the time of such purchase, made payment to such taxpayer (whether in cash or in the form of a partial payment or down payment for the purchase of such principal residence) in an amount equal to the credit otherwise allowable to such taxpayer, and(D)with respect to any incentive otherwise available for taking a mortgage for which a credit is allowed under this section, including any incentive in the form of a rebate or discount provided by the mortgage lender, ensured that—(i)the availability or use of such incentive shall not limit the ability of a taxpayer to make an election described in paragraph (1), and(ii)such election shall not limit the value or use of such incentive.(3)

Timing

An election described in paragraph (1) shall be made by the taxpayer not later than the date on which the purchase of the principal residence with respect to which the credit under subsection (a) is allowed is made.(4)

Revocation of registration

Upon determination by the Secretary that a mortgage lender has failed to comply with the requirements described in paragraph (2), the Secretary may revoke the registration (as described in subparagraph (A) of such paragraph) of such mortgage lender.(5)

Tax treatment of payments

With respect to any payment described in paragraph (2)(C), such payment—(A)shall not be includible in the gross income of the taxpayer, and(B)with respect to the mortgage lender, shall not be deductible under this title.(6)

Advance payment to mortgage lenders

(A)

In general

The Secretary shall establish a program to make advance payments to any eligible entity in an amount equal to the cumulative amount of the credits allowed under subsection (a) with respect to any mortgages issued by such entity for which an election described in paragraph (1) has been made.(B)

Excessive payments

Rules similar to the rules of section 6417(d)(6) shall apply for purposes of this paragraph.(C)

Treatment of advance payments

For purposes of section 1324 of title 31, United States Code, the payments under subparagraph (A) shall be treated in the same manner as a refund due from a credit provision referred to in subsection (b)(2) of such section.(7)

Recapture

In the case of any taxpayer who has made an election described in paragraph (1) with respect to the purchase of a principal residence and received a payment described in paragraph (2)(C) from an eligible entity, such principal residence shall be treated as a principal residence with respect to which a credit was allowed under subsection (a) for purposes of subsection (f).

(b)

Certain errors with respect to first-time homebuyer tax credit treated as mathematical or clerical errors

Paragraph (2) of section 6213(g) of the Internal Revenue Code of 1986 is amended by striking and at the end of subparagraph (U), by striking the period at the end of subparagraph (V) and inserting , and, and by inserting after subparagraph (V) the following new subparagraph:

(W)an entry on a return claiming the credit under section 36 if—(i)the Secretary obtains information from the person issuing the TIN of the taxpayer that indicates that the taxpayer does not meet the age requirement of section 36(b)(4),(ii)information provided to the Secretary by the taxpayer on an income tax return for at least one of the 2 preceding taxable years is inconsistent with eligibility for such credit, or(iii)the taxpayer fails to attach to the return the form described in section 36(d)(3).

(c)

Effective date

The amendments made by this section shall apply with respect to principal residences purchased after the date of the enactment of this Act.