First-Time Homebuyer Act Offers Up to $15,000 Refundable Credit—But You’re Locked In for Four Years

The new First-Time Homebuyer Tax Credit Act of 2025 is looking to put serious cash back into the pockets of people buying their first house. The core of this bill is a refundable tax credit equal to 10% of the home’s purchase price, capped at a maximum of $15,000. Because it’s refundable, you get the money even if you don’t owe that much in taxes, making it a huge potential boost for closing costs or a down payment. However, accessing this full benefit comes with some strict rules about your income, the price of the house, and how long you plan to stay put.

The $15K Catch: Income and Price Limits

This isn't a blanket handout; the bill is designed to target middle-income buyers in specific markets. The credit starts to shrink if your Modified Adjusted Gross Income (MAGI) exceeds 150% of the Area Median Income (AMI) for your location. If you’re buying in a high-cost area, that’s good news, but if you have a decent salary in a lower-cost region, you might see your credit amount quickly disappear. Similarly, the credit is reduced if the home’s purchase price is more than 110% of the Area Median Purchase Price (AMPP). This means if you’re trying to stretch your budget for a slightly larger house or one in a competitive neighborhood, you risk losing a chunk of the benefit.

The Four-Year Golden Handcuffs

Here’s the biggest detail that could trip up busy people: the four-year recapture period. If you sell your home or stop using it as your main residence within four taxable years of buying it, you have to pay back a portion of the credit. The amount you owe is calculated based on how many years are left in that four-year window. For example, if you claim the full $15,000 credit and then sell after two years, you’d likely owe back $7,500. This provision, detailed in the recapture section, effectively locks you into your new home for four years if you want to keep the full tax benefit. While there are exceptions for military orders, death, or divorce, this recapture clause could be a serious headache for anyone whose job requires frequent moves or who anticipates needing to upsize or downsize quickly.

The Lender Option: Cash Now vs. Tax Break Later

One interesting, and potentially complicated, provision allows you to transfer the credit directly to your mortgage lender. If you choose this, the lender must register with the government and pay you the full credit amount upfront, before closing. This is fantastic for people who need immediate cash for closing costs. However, be cautious: while the bill states the lender must pay you the full credit amount, this introduces a new dynamic where lenders become involved in a tax benefit. Crucially, even if the lender takes the credit, you are still responsible for paying it back if you trigger the four-year recapture rule. This means you get the cash upfront, but the government’s lien on your future remains, which is important to remember if you’re forced to sell early.

Defining the Details of Eligibility

The bill defines a “first-time homebuyer” clearly: you can’t have owned any residence in the U.S. during the three years leading up to the purchase. To qualify for the credit, the purchase must be financed with a federally backed mortgage loan, which limits the options for buyers using private financing or cash. Also, if you’re buying with a partner but aren't married, the total credit for the house is still capped at $15,000, and the Secretary of the Treasury gets to decide how that credit is divided between the two of you—a detail that could lead to some complicated tax filing for unmarried co-buyers.