Credit for qualified residence interest

(a)

In general

Subpart A of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 25F the following new section:

25G.

Qualified residence interest

(a)

In general

There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the aggregate amount of qualified residence interest paid or accrued by the taxpayer during such taxable year. (b)

Qualified residence interest

For purposes of this section— (1)

In general

The term qualified residence interest means any interest on acquisition indebtedness with respect to the qualified residence of the taxpayer. For purposes of the preceding sentence, the determination of whether any property is the qualified residence of the taxpayer shall be made as of the time the interest is accrued. (2)

Acquisition indebtedness

The term acquisition indebtedness means any indebtedness which— (A)is incurred in acquiring, constructing, or substantially improving any qualified residence of the taxpayer, and (B)is secured by such residence.

Such term also includes any indebtedness secured by such residence resulting from the refinancing of indebtedness meeting the requirements of the preceding sentence (or this sentence); but only to the extent the amount of the indebtedness resulting from such refinancing does not exceed the amount of the refinanced indebtedness.

(3)

Qualified residence

The term qualified residence means the principal residence (within the meaning of section 121) of the taxpayer. (c)

Limitations

(1)

Dollar limitation

(A)

In general

The credit allowed under subsection (a) to any taxpayer for any taxable year shall not exceed $2,000. (B)

Married individuals filing separately

In the case of a married individual filing a separate return, subparagraph (A) shall be applied by substituting $1,000 for $2,000. (C)

Other individuals

If two or more individuals who are not married own and use the same residence as their qualified residence and pay or accrue qualified residence interest with respect to such 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 for any taxable year shall not exceed $2,000. (2)

Limitation based on modified adjusted gross income

(A)

In general

The amount of the credit allowed under subsection (a) for any taxable year shall be reduced (but not below zero) by $20 for each $1,000 (or fraction thereof) by which the taxpayer’s modified adjusted gross income exceeds the threshold amount. For purposes of the preceding sentence, the term modified adjusted gross income means adjusted gross income increased by any amount excluded from gross income under section 911, 931, or 933. (B)

Threshold amount

For purposes of subparagraph (A), the term threshold amount means— (i)$300,000 in the case of a joint return or a surviving spouse (as defined in section 2(a)), (ii)$200,000 in the case of a head of household (as defined in section 2(b)), and (iii)$150,000 in the case of a taxpayer not described in clause (i) or (ii). (d)

Denial of double benefit

No credit or deduction shall be allowed under this chapter for any qualified residence interest taken into account in determining the credit under this section. (e)

Inflation adjustment

In the case of any taxable year beginning after 2027, each dollar amount in subsection (c) shall be increased by an amount equal to— (1)such dollar amount, multiplied by (2)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 2026 for calendar year 2016 in subparagraph (A)(ii) thereof.

If any increase under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.

(f)

Nonresident alien ineligible for credit

No credit shall be allowed under this section to any nonresident alien. (g)

Regulations

The Secretary shall issue such regulations or other guidance as may be necessary to carry out the purposes of this section.

(b)

Clerical amendment

The table of sections for subpart A of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 25F the following new item:

Sec. 25G. Qualified residence interest.

(c)

Effective date

The amendments made by this section shall apply to taxable years beginning after December 31, 2026.