Homebuyers to Receive $15k Tax Credit Under New Bill

Lawmakers in Rhode Island are proposing a tax credit scheme that could save first time buyers thousands of dollars.

The First-Time Homebuyer Tax Credit Act has been proposed in the northeastern state for first time buyers who meet certain requirements to claim up a refundable tax credit worth up to 10 percent of a home's purchase price—up to a maximum of $15,000.

Introduced by Rhode Island Democratic Senator Sheldon Whitehouse and New Mexico Senator Martin Heinrich, alongside Representatives Jimmy Panetta and Earl Blumenauer, they say the proposal would address a "dramatic increase in housing costs that is preventing families from getting a foothold in the middle class." Newsweek has contacted Whitehouse for comment via email.

It comes as home buying is becoming increasingly difficult for prospective purchasers across the U.S. According to research conducted by Harvard University's Joint Center for Housing Studies, in 2022 the median sale price for a single-family home in the US was 5.6 times higher than the median household income—the highest rate on records dating back to the 1970s. Separate research by Bankrate found that the typical down payments for a first home in 2023 were the highest recorded since 1997.

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Potential homebuyers would need to meet several requirements to be eligible for the tax credit:

• Those making 150 percent of the area median income or less.
• Houses with a purchase price of 110 percent or below the median purchase price.
• Home purchases must be financed through federally-backed mortgages.

According to a summary of the bill text, taxpayers would have "the option of receiving the credit at the time of purchase by working with their mortgage issuer, or they alternatively elect to treat the purchase of their home as occurring in the prior taxable year to receive the credit before tax season if they are unable to qualify for the credit at point of sale."

The statement released by the lawmakers on March 13 claims there is not a single community in Rhode Island "where families earning the state's median income can afford to buy a typical home."

They said the issue is particularly pertinent for young people not just in Rhode Island but nationwide, with the release claiming that the "typical age of a first-time homebuyer reached a record high of 36 in 2022, up from 29 in 1981."

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"Owning a home is at the core of the American dream, and it has been pushed further out of reach for more families over the last few years," said Whitehouse. "Our legislation will make homeownership, which provides a stable foothold in the middle class and a straightforward way to build wealth, a reality for more Rhode Islanders."

Correction, 3/19/24, 08:06 a.m. ET: The article was corrected to say Martin Heinrich is a senator in New Mexico, not Rhode Island.