Don't Count On Biden's $15k Tax Credit For First Time Buyers

Certified Mortgage Advisor
NMLS 1701021
Published 
January 22, 2021

Biden's Tax Credit: Yes or No

So should you count on Biden's $15,000 proposed tax credit for first-time homebuyers? The answer here has a resounding "No". So the Biden administration earlier on in their running platform talks about a $15,000 first-time homebuyer credit to stimulate the economy.

Questions, questions, questions

So I've been getting a lot of questions. Should I buy now if I do buy now and then the credit happens will I get money back for that? Is it gonna happen retroactively? Or how is this going to be handled? Should I just not buy-in and wait for the tax credit to come out? Cause I don't want to miss out on free money.

The answer

The answer is you shouldn't wait. We have to understand that this is just a talking point. Quick crash course in how laws work in Bill's work is. Do you remember the schoolhouse, Rocky, the cab, "I'm Just a Bill" song? Yes? All it is right now is a talking point, has to be turned into a bill. Then that bill has to be passed through the house and through the Senate and then has to be signed off into law by the president.

How long do we need to wait?

So we're a long way away from a $15,000 tax credit happening. And here's my theory on this tax credit as well. I do not expect we're going to be seeing this tax credit for probably a little bit of time.

Here's my theory

Who knows if this is true. But my theory is that we have a really strong housing market right now. I think the Biden administration is keeping this $15,000 tax credit in their back pocket as a way to stimulate the economy in the event that housing starts to decline a little bit.

I think our hope is that if housing demand starts to decline within the next four years, what they can do is pull out that tax credit as a way to incentivize and kind of re-stir up the housing market, bring more buyers in. So I don't think we would actually end up seeing a tax credit if at all until we saw some decline in buyer demand, probably a significant decline in buyer demand. Then that bill will probably be drafted or included in another bill and then passed through Congress.

Do we need to wait?

Congress isn't just going to put out this type of home buyer stimulus for the fun of it. They want to be able to use it for a reason. And that's what I think is going to happen. So I don't think you should wait for this tax credit. There's not been any clarity about if you buy and then are they going to give that money back to you in a certain period of time or a taxi or whatever that looks like. I don't think that should impact your buying decision.

6% in 2021

Forecasted appreciation with most economists is 6% in 2021. So let's say you don't buy a home right now because you're anticipating a $15,000 tax credit happening. So if we purchase, if we were looking at a home that was $300,000, that same home at the end of 2021 should gain around $18,000 worth of appreciation. That's 6% on a $300,000 house. That's just in one year. So we gave up $18,000 worth of gain to maybe get the chance at $15,000. It just really doesn't make sense.

Don't let this tax credit stop you from buying

So don't let this prospect of a potential tax credit deter you from buying, that should not be included in your decision. Think if a tax credit comes out great, then we can use it. Then we can talk about exploring it. But right now it's just an idea. It's very possible that it could never happen at all. At the same time it's possible. But it's still going to have to be converted into a bill. That's going to have to pass through the house, pass through the Senate, and then signed off by the president to be able to turn into a bill.

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