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$10,000 Tax Credit: Biden proposes ‘starter home’ tax credit as solution to housing crisis

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  • Staff Report 

In a bid to make home ownership more accessible amidst soaring mortgage rates and home values, President Joe Biden announced a proposal for new tax credits during his State of the Union address. The initiative targets both first-time homebuyers and current homeowners looking to upgrade from their “starter homes,” offering a $10,000 tax credit to each group. These proposals aim to rejuvenate a stagnant real estate market, characterized by homeowners reluctant to relinquish low mortgage rates acquired during the pandemic.

Some worry that a housing crisis is looming post-pandemic if action isn’t taken by Congress

The proposed tax credits, which require Congressional approval, have garnered support from affordable housing advocates. David M. Dworkin, CEO of the National Housing Council, praised the address as significantly impactful for housing policy in over five decades. This move by Biden seeks to alleviate the burden of housing affordability, a pressing issue for Americans across various demographics.

Under Biden’s plan, first-time homebuyers could receive an annual tax credit of $5,000 for two years, amounting to a total of $10,000. Current homeowners selling their starter homes—properties below the median home price in their county to another owner-occupant rather than an investor—would also be eligible for a one-year tax credit of up to $10,000. These credits aim to serve “middle-class families,” specifically limiting eligibility to households earning under $200,000.

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The administration believes these credits could significantly impact the housing market by facilitating the purchase of homes for approximately 3.5 million middle-class families and aiding around 3 million families in acquiring larger homes. This strategy addresses the “lock-in” effect, where homeowners hesitate to sell due to the advantageous low mortgage rates they currently enjoy.

The timeline for these tax credits remains uncertain, hinging on legislative action from Congress. Despite the challenges of passing such measures in an election year, the White House is pushing for enactment within the year to benefit homebuyers and homeowners starting the 2024 tax year. These measures represent a crucial step toward mitigating the housing affordability crisis, emphasizing the need for timely legislative support.

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