Are There First-Time Homebuyer Tax Credits?

A guide to government incentives that can lower your housing costs

Buying a home is an exciting financial milestone, but the down payment and closing costs can be intimidating. You’ll want to avoid outdated advice about financial incentives and support and instead focus on current opportunities. To take advantage of all the available options to help lower your housing costs, you may have researched things like the first-time homebuyer tax credit to get a break during tax season.

A first-time homebuyer is typically defined in the real estate world as someone who hasn’t owned a primary residence in the last three years. If you fall into this category, you might wonder if this popular federal credit from the recession era is still available, or if there is something similar available today. This article clarifies the history of the first-time homebuyer tax credit and the current programs and deductions that can help make homeownership more attainable.

What Is the First-Time Homebuyer Tax Credit?

This federal program was in place between 2008 and 2010 and provided a credit of 10% of a home’s purchase price, up to $8,000. This tax break for buying a house provided a dollar-for-dollar reduction in tax liability and was refundable. This popular program was established to stimulate the housing market during a recession by offering a credit that directly reduced tax liability.

Unfortunately, this federal tax credit for buying a house is no longer available, as it expired in 2010. However, if you are buying a house today, there are numerous tax deductions for homeowners and incentives designed to make homeownership more affordable.

History of the First-Time Homebuyer Tax Credit

To understand why this tax break was so popular, it’s important to consider the 2008 housing crisis. The federal government needed a way to boost the real estate market by encouraging Americans to buy homes. The Housing and Economic Recovery Act of 2008 and the Worker, Homeownership, and Business Assistance Act of 2009 created incentives for new homebuyers.

The initial version, created in 2008, was an interest-free loan of up to $7,500 that had to be repaid. In 2009, the program expanded from a repayable interest-free government loan to a tax credit of up to $8,000. The program became popular and encouraged buyers to jump into the housing market. The incentive was extended for part of 2010 before it ended.

Proposed Legislation for First-Time Homebuyers

New legislation initiatives are often introduced to benefit first-time homebuyers. As of late 2025, members of Congress have introduced bills such as the First Time Homebuyer Tax Credit Act of 2025. While its future is unclear, if enacted, this legislation would create a new refundable tax credit with broad benefits for eligible homebuyers.

Current Tax Benefits, Programs, and Assistance for Homebuyers

Even though the tax break ended, you can still access first-time homebuyer programs that reduce the cost of owning a home. Many of these can be claimed on your federal income tax return or reduce the upfront costs of homeownership:

• Mortgage interest deduction: Mortgage interest is often tax-deductible and can be one of the biggest tax breaks to owning a home. It allows homeowners to deduct the interest paid on up to $750,000 of mortgage debt.
• Mortgage Credit Certificates (MCCs): An MCC allows you to claim a percentage of your annual mortgage interest as a tax credit, lowering your tax liability dollar-for-dollar. However, they are only available in some states.
• Mortgage discount points: If you pay points at closing to get a lower interest rate, you can often fully deduct the interest charges for the tax year that you bought your home.
• Government-backed loans: VA loans backed by the Department of Veterans Affairs, FHA loans by the Federal Housing Administration, and USDA loans by the U.S. Department of Agriculture for rural properties often have lower downpayment requirements and lower interest rates.
• Withdraw from your IRA (Individual Retirement Account): First-time homebuyers often qualify for a penalty-free withdrawal of up to $10,000 from their IRA to purchase a house.
• State and local assistance: Many state and local Housing Finance Agencies (HFAs) have down payment assistance programs and grants that do not require repayment.
• Property taxes deduction: Under current rules, you can deduct your property taxes from your federal income tax return up to $10,000 annually (or $5,000 if married filing separately) under the current IRS rules.
• Private Mortgage Insurance (PMI): Although PMI premiums aren’t deductible for the 2025 tax year because the previous deduction expired, the deduction is scheduled to return in 2026 if you meet income requirements.

Final Thoughts: Make the Most of Your First Home Purchase

Although the first-time homebuyer tax credit is no longer available, there are many other financial incentives and programs that help make homeownership more affordable. Research programs like local down payment assistance programs to determine which opportunities you qualify for. Factor available incentives into your budget to determine if you can afford to purchase a home.

Ready to find the loan that is right for you? Get prequalified today to start your homebuying journey with Freedom Mortgage.