Sponsor
S. Raja Krishnamoorthi
Representative · D-IL
The bill expands up-front affordability for many first-time and lower-income homebuyers by offering a refundable credit and lender advance option, but limits for high-cost areas, recapture rules, administrative requirements, and lender-side restrictions could reduce benefits or create costs for some buyers and lenders.
First-time homebuyers: receive a refundable tax credit up to 10% of the purchase price (phased over five years), lowering out-of-pocket costs at purchase.
Buyers in lower-income areas: the credit is targeted via an income phaseout tied to 150% of area median income, prioritizing low- and moderate-income households.
Certain public-serving workers (first responders, childcare workers, teachers): may receive the full 10% credit in a single year, improving immediate affordability for these occupations.
Buyers in high-cost areas: the credit is capped at $25,000 and phases out with income and local prices, so purchasers in expensive markets may receive reduced or no benefit.
Homeowners who sell or stop using the property as their principal residence: may face recapture rules that create unexpected tax bills up to a portion of the credit.
Buyers using non-federally-backed financing or informal purchase arrangements: may be excluded or face extra paperwork because the program requires federally backed financing and settlement statement attachments.
Based on analysis of 2 sections of legislative text.
Creates a refundable first-time homebuyer tax credit equal to 10% of purchase price divided over five years, capped at $25,000 and phased out by HUD area median income and purchase-price tests.
Representative · D-IL
Creates a refundable federal tax credit for first-time homebuyers that covers a percent of a primary residence purchase price, subject to per-purchase dollar caps and income- and area-based phaseouts. The credit applies to individuals who buy a principal residence within the year or in any of the four prior years (a five-year lookback) and uses HUD area median income and area median purchase price to determine eligibility and phaseouts. The credit’s “applicable credit amount” equals 10% of the purchase price distributed over five years (effectively 2% per year as drafted), capped at $25,000 per purchase ($12,500 for married filing separately) with allocation rules for co-purchasers, and formulas reduce the credit for higher-income taxpayers or purchases above local median purchase-price thresholds.
Official title: To amend the Internal Revenue Code of 1986 to establish the first-time homebuyer refundable tax credit.
Introduced January 20, 2026 by S. Raja Krishnamoorthi · Last progress January 20, 2026