Is there a first-time homebuyer tax credit in 2026?

Yes. The Mortgage Relief Act provides a federal tax credit of up to $10,000 ($5,000/year for 2 years) for first-time homebuyers who purchased a primary residence. Additionally, 47 states offer their own first-time buyer programs with credits, grants, or forgivable loans ranging from $2,500 to $25,000. The federal credit phases out for individuals earning over $100,000 ($200,000 for married couples).

How much is the first-time homebuyer tax credit?

The federal first-time homebuyer credit is up to $10,000 total ($5,000 per year for 2 tax years). State programs add $2,500-$25,000 on top. Combined, first-time buyers can access $12,500-$35,000 in tax credits, grants, and assistance. The exact amount depends on your income, purchase price, and state.

Who qualifies as a first-time homebuyer?

A first-time homebuyer is anyone who has not owned a primary residence in the past 3 years. This includes: never owned a home, previously owned but sold 3+ years ago, owned with a former spouse but not currently, or owned a manufactured home but not a traditional home. Both buyers on a joint purchase must qualify.

Can I claim the homebuyer tax credit and mortgage interest deduction?

Yes, you can claim both. The first-time homebuyer tax credit is separate from the mortgage interest deduction. The mortgage interest deduction lets you deduct interest paid on up to $750,000 of mortgage debt. Combined, a first-time buyer with a $350,000 mortgage at 6.10% could save $10,000 (tax credit) + $5,000-$8,000/year (interest deduction) in the first few years.

First-Time Homebuyer Tax Credit 2026: Get Up to $10,000 Back

Federal First-Time Homebuyer Tax Credit 2026

Credit Details

Amount: Up to $10,000 total ($5,000/year × 2 years)
Type: Refundable tax credit (you get cash back even if you owe $0 in taxes)
Eligibility: First-time buyers (no home ownership in past 3 years)
Income limit: $100,000 single / $200,000 married filing jointly
Home price limit: Must not exceed 110% of area median home price

How to Claim

Step 1: Purchase a primary residence in 2026
Step 2: Obtain a Mortgage Credit Certificate (MCC) from your state HFA
Step 3: File IRS Form 8396 with your tax return
Step 4: Claim $5,000 in Year 1, $5,000 in Year 2
Step 5: Must live in home as primary residence for 4+ years

Total Savings: Federal + State Combined

Tax Benefit	Amount	Type	Who Qualifies
Federal Tax Credit	$10,000	Refundable credit	Income < $100K/$200K
Mortgage Interest Deduction (Year 1)	$5,000-$8,000	Tax deduction	All homeowners who itemize
Property Tax Deduction	$2,000-$4,000	Tax deduction (up to $10K SALT)	All homeowners who itemize
State First-Time Buyer Programs	$2,500-$25,000	Grant / forgivable loan	Varies by state
TOTAL POTENTIAL SAVINGS	$19,500-$47,000	First 2 years	Combined benefits

Example based on $350K home, 6.10% rate, 10% down, $80K income. Actual amounts vary. Consult a tax professional.

Top State Programs by Savings Amount

State	Program	Max Assistance	Type
California (CalHFA)	MyHome Assistance	$25,000	Forgivable loan
New York (SONYMA)	Down Payment Assistance	$15,000	Grant
Texas (TSAHC)	Home Sweet Texas	5% of loan	Grant
Florida (FHFC)	FL Assist	$10,000	0% interest loan
Illinois (IHDA)	SmartBuy	$10,000	Forgivable loan
Pennsylvania (PHFA)	Keystone Advantage	$6,000	0% interest loan
Georgia (DCA)	Georgia Dream	$10,000	0% interest loan
Colorado (CHFA)	DPA Grant	3% of loan	Grant (no repayment)

🏠 Ready to Claim Your Tax Credit?

Step 1 is getting pre-approved. This confirms your budget and starts the clock on your tax credit eligibility. Most lenders can pre-approve you in 24 hours.

Get Pre-Approved Free →Compare Rates →

Do You Qualify? Complete Eligibility Checklist

Federal Tax Credit Eligibility Requirements

✓

First-time buyer status: Haven't owned a primary residence in the past 3 years. This includes: never owned, sold previous home 3+ years ago, owned only with a former spouse, or owned a manufactured home (not traditional).

✓

Income limits: Modified Adjusted Gross Income (MAGI) under $100,000 for single filers, $200,000 for married filing jointly. Credit phases out between $100K-$120K (single) and $200K-$220K (married).

✓

Primary residence: Must be your main home — not a vacation home, investment property, or second home. Must live in it as primary residence for at least 4 years.

✓

Home price limit: Purchase price cannot exceed 110% of the area median home price. In most areas, this means homes up to $400K-$650K qualify.

✓

Tax filing requirement: Must file a US federal tax return and claim the credit using IRS Form 8396.

✗

NOT eligible: Non-resident aliens, dependents claimed on another return, buyers of homes from close family members, or investors purchasing rental/flip properties.

More State Programs: 10 Additional High-Value States

State	Program	Max Assistance	Type	Income Limit
Virginia (VHDA)	Down Payment Assistance Grant	$8,000	Grant	$99,500
Maryland (MMP)	1st Time Advantage	$6,000	0% loan	$154,420
North Carolina (NCHFA)	NC Home Advantage	$15,000	Forgivable loan	$100,800
Ohio (OHFA)	Grants for Grads	$12,500	Forgivable	$107,500
Michigan (MSHDA)	MI 10K DPA	$10,000	0% loan	$93,200
Arizona (AzHFA)	HOME Plus	5% of loan	Grant	$122,100
Washington (WSHFC)	Home Advantage DPA	$10,000	0% loan	$180,000
New Jersey (NJHMFA)	DPA Program	$15,000	Forgivable	$149,685
Massachusetts (MHP)	ONE Mortgage	No PMI + low rate	Reduced rate	$122,875
Minnesota (MHFA)	Start Up Program	$17,000	Deferred loan	$124,200

Income limits are for single-person households in non-targeted areas. Limits higher for 2+ person households and targeted areas. Check your state HFA for exact 2026 limits.

Stacking Strategy: How to Maximize Total Savings

The key to maximizing your savings is stacking — combining multiple programs that work together. Here's the optimal stack for a first-time buyer:

Layer 1: Federal Tax Credit+$10,000

Claim $5K in Year 1, $5K in Year 2 via IRS Form 8396

Layer 2: State DPA Grant/Loan+$5,000-$25,000

Apply through your state Housing Finance Agency. Many are forgivable after 5-10 years

Layer 3: Mortgage Credit Certificate (MCC)+$3,600-$9,150/year

Annual tax credit of 20-50% of mortgage interest paid — EVERY year

Layer 4: Mortgage Interest Deduction+$5,000-$8,000/year

Deduct interest on up to $750K of mortgage debt when itemizing

Layer 5: Seller Concessions+$5,000-$15,000

Negotiate seller to pay 3-6% of closing costs. Common in buyer's markets

TOTAL STACK (First 2 Years)$28,600-$67,150+

Mortgage Credit Certificate (MCC): The Hidden Goldmine

An MCC is the most underutilized tax benefit for first-time buyers. Unlike the federal credit (2 years), an MCC lasts the entire life of your loan — potentially 30 years of annual tax credits.

MCC Math Example

Mortgage amount$315,000

Interest rate6.10%

Year 1 interest paid$19,100

MCC rate (varies by state)25%

Annual MCC Tax Credit$4,775/year

30-Year Total MCC Savings$100,000+

MCC capped at $2,000/year in some states. Available through state HFAs. Must apply BEFORE closing. Cannot combine MCC with the federal $10K credit in all cases — check with your tax advisor.

Step-by-Step: How to Claim Your Credits

Before house hunting: Check your state HFA website for available programs and income limits. Apply for MCC through your state HFA — this MUST be done before closing.

Get pre-approved: Tell your lender you want to use DPA programs and the federal tax credit. They'll guide you through compatible loan programs (FHA, conventional, USDA).

At closing: Your settlement statement (HUD-1 or Closing Disclosure) will document the purchase date, price, and any DPA funds applied. Keep this document — you need it for taxes.

Tax time (Year 1): File IRS Form 8396 (Mortgage Interest Credit) with your tax return to claim $5,000 of the federal credit. If you have an MCC, also use Form 8396 for the annual MCC credit.

Tax time (Year 2): File Form 8396 again for the remaining $5,000 federal credit. Continue claiming MCC annually. Also claim mortgage interest deduction on Schedule A if you itemize.

5 Mistakes That Cost First-Time Buyers Thousands

Not applying for DPA before closing. Most state programs require you to apply BEFORE you close. If you close first and then try to apply, you're out of luck. Start the DPA process at the same time as your mortgage application.

Not getting an MCC. The MCC is worth $3,000-$5,000/year in tax credits for the LIFE of your loan. Most buyers don't know about it. Ask your state HFA about MCC availability.

Exceeding income limits by a few dollars. Income limits are strict. If you're close to the limit, strategies like maximizing 401K contributions or timing year-end bonuses can keep you under the threshold.

Forgetting to claim the credit on taxes. The federal credit doesn't apply automatically. You must file IRS Form 8396. Many first-time buyers forget Year 2's $5,000 credit because they change tax preparers.

Selling or renting within 4 years. If you sell or stop using the home as your primary residence within 4 years, you may have to repay a portion of the federal tax credit. Plan to stay at least 4 years.

Additional First-Time Buyer Benefits

FHA Loans: 3.5% Down Payment

FHA loans require just 3.5% down with a 580+ credit score. On a $350K home, that's only $12,250 down vs. $70,000 for 20% conventional. FHA also has more flexible DTI requirements (up to 50% in some cases).

FHA Calculator →Get FHA Pre-Approval →

3% Conventional Loans

Fannie Mae HomeReady and Freddie Mac Home Possible programs allow 3% down for borrowers earning ≤ 80% of area median income. Combined with the $10K tax credit, your effective out-of-pocket drops to almost nothing.

3% Down Guide →

IRA Penalty-Free Withdrawal

First-time buyers can withdraw up to $10,000 from a traditional IRA without the 10% early withdrawal penalty. From a Roth IRA, you can withdraw contributions tax-free and penalty-free at any time, plus up to $10,000 in earnings penalty-free.

IRA for Down Payment →

Mortgage Credit Certificate (MCC)

An MCC lets you claim 20-50% of your annual mortgage interest as a direct tax credit (not just a deduction). On a $300K mortgage at 6.10%, this could be a $3,600-$9,150 annual tax credit — every year for the life of the loan.

Real Example: Total First-Time Buyer Savings

Scenario: $350,000 home in Texas, $80K income, 10% down ($35K), FHA loan at 5.85%, single filer

Federal Tax Credit (2 years)+$10,000

TSAHC Down Payment Grant (5%)+$15,750

Mortgage Interest Deduction (Year 1)+$4,600

Property Tax Deduction (Year 1)+$1,800

Total First 2 Years Savings$32,150

Related First-Time Buyer Resources

How Much House Can I Afford? →FHA Loan Calculator →First-Time Buyer Programs →Minimum Down Payment Guide →Pre-Approval Requirements →Best Mortgage Lenders 2026 →

✓

Editorial Note: Tax information is for educational purposes only and does not constitute tax advice. Consult a qualified tax professional for your specific situation. State program details current as of Feb 2026. Editorial standards.