First-time homebuyer refundable credit

(a) In general Section 36 of the Internal Revenue Code of 1986 is amended to read as follows: 36. First-time homebuyer refundable credit (a) Allowance of credit In the case of an individual who is a first-time homebuyer of a principal residence in the United States during a taxable year, there shall be allowed as a credit against the tax imposed by this subtitle for such taxable year an amount equal to 20 percent of the purchase price of the residence. (b) Limitations; special rules based on marital and filing status (1) Dollar limitation The credit allowed under subsection (a) shall not exceed $15,000. (2) Limitation based on purchase price The amount allowable as a credit under subsection (a) (determined without regard to this paragraph and paragraph (3), and after the application of paragraph (1)) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as— (A) the excess (if any) of— (i) the purchase price of the residence, over (ii) an amount equal to 60 percent of the conforming loan limit applicable to the residence, bears to (B) $100,000. For purposes of the preceding sentence, the term conforming loan limit with respect to any residence means the applicable limitation governing the maximum original principal obligation for a mortgage secured by a residence of the same type, as determined and adjusted annually under section 302(b)(2) of the Federal National Mortgage Association Charter Act and section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act. (3) Limitation based on modified adjusted gross income (A) In general The amount allowable as a credit under subsection (a) (determined without regard to this paragraph and after the application of paragraphs (1) and (2)) for the taxable year shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which is so allowable as— (i) the excess (if any) of— (I) the taxpayer's modified adjusted gross income for the applicable taxable year, over (II) the applicable threshold, bears to (ii) $50,000. (B) Modified adjusted gross income For purposes of subparagraph (A), the term modified adjusted gross income with respect to any taxable year means the adjusted gross income of the taxpayer for such taxable year increased by any amount excluded from gross income under section 911, 931, or 933 for such taxable year. (C) Applicable threshold For purposes of subparagraph (A), the applicable threshold is— (i) except as provided in clause (ii), $100,000, and (ii) an amount equal to 200 percent of the amount in effect under clause (i), in the case of a head of household (as defined in section 2(b)) or a joint return. (D) Applicable taxable year For purposes of subparagraph (A), the term applicable taxable year means— (i) the taxable year with respect to which the credit allowable under subsection (a) is being claimed, or (ii) for purposes of the application of subsection (g)(3), the most recent taxable year for which a return of tax has been filed by the taxpayer, provided that such taxable year is either— (I) the taxable year preceding the taxable year described in clause (i), or (II) the taxable year preceding the taxable year described in subclause (I). (4) Additional limitations No credit shall be allowed under subsection (a) with respect to the purchase of any residence for a taxable year— (A) if the taxpayer is a nonresident alien, or (B) if— (i) the taxpayer has not attained age 18 as of the date of such purchase, or (ii) a deduction under section 151 with respect to the taxpayer is allowable to another taxpayer for the taxable year. In the case of a taxpayer who is married, the taxpayer shall be treated as meeting the age requirement of subparagraph (B)(i) if the taxpayer or the taxpayer's spouse meets such age requirement. (5) Multiple purchasers If 2 or more individuals who are not married purchase a principal residence— (A) the amount of the credit under subsection (a) shall be allocated among such individuals in such manner as the Secretary may prescribe by taking into account the requirements of paragraphs (2) and (3), (B) for purposes of subparagraph (A), with respect to the requirements of paragraph (3)— (i) such paragraph shall be applied by aggregating the modified adjusted gross income of all such individuals, and (ii) the applicable threshold shall be the amount described in subparagraph (C)(ii) of such paragraph, (C) the total amount of the credits allowed to all such individuals shall not exceed the limitation under paragraph (1) (as modified by paragraph (7)), and (D) with respect to each such individual, no credit shall be allowed under subsection (a) unless such individual includes the taxpayer identification numbers for all such individuals on their return of tax for the taxable year. (6) Married couples must file joint return If an individual is married at the close of the taxable year, the credit shall be allowed under subsection (a) only if the individual and the individual's spouse file a joint return for the taxable year. (7) Adjustment for inflation In the case of any taxable year beginning after December 31, 2027, each of the dollar amounts in paragraphs (1) and (3)(C)(i) shall be increased by an amount equal to— (A) such dollar amount, multiplied by (B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting calendar year 2026 for calendar year 2016 in subparagraph (A)(ii) thereof. Any increase determined under the preceding sentence shall be rounded to the next lowest multiple of $50. (c) Definitions For purposes of this section— (1) First-time homebuyer (A) In general The term first-time homebuyer means any individual who acquires a principal residence located in the United States by purchase if such individual (and, if married, such individual's spouse)— (i) has not claimed any credit or deduction under this title for any previous taxable year with respect to the purchase or ownership of any residence or residential real estate (including for any expenditures relating to the placing in service of any property on, in connection with, or for use in such a residence or real estate), and (ii) attests under penalty of perjury that— (I) the individual (and, if married, the individual's spouse) has not owned a principal residence at any time prior to the purchase of the principal residence to which this section applies, and (II) the principal residence to which this section applies was not acquired from a person related to such individual or spouse. (B) Waiver in case of certain changes in status The Secretary may, in such manner as the Secretary may prescribe, waive the requirements of subparagraph (A) for a taxable year in the case of an individual who is not eligible to file a joint return for the taxable year, and who was married at the time the individual or the individual's former spouse purchased a previous residence. (C) Multiple purchasers If 2 or more individuals who are not married purchase a principal residence, no credit shall be allowed under subsection (a) unless each individual satisfies the requirements under subparagraph (A). (2) Principal residence The term principal residence has the same meaning as when used in section 121. (3) Purchase (A) In general The term purchase means any acquisition, but only if— (i) the property is not acquired from a person related to the person acquiring such property (or, if either such person is married, such individual's spouse), and (ii) the basis of the property in the hands of the person acquiring such property is not determined— (I) in whole or in part by reference to the adjusted basis of such property in the hands of the person from whom acquired, or (II) under section 1014(a). (B) Construction A residence which is constructed by the taxpayer shall be treated as purchased by the taxpayer on the date the taxpayer first occupies such residence. (4) Purchase price The term purchase price means the adjusted basis (without regard to any reduction under section 1016(a)(39)) of the principal residence on the date such residence is purchased. (5) Related persons A person shall be treated as related to another person if the relationship between such persons would result in the disallowance of losses under section 267 or 707(b) (but, in applying subsections (b) and (c) of section 267 for purposes of this section, paragraph (4) of section 267(c) shall be treated as providing that the family of an individual shall include only the individual's spouse, ancestors, lineal descendants, and spouse's ancestors and lineal descendants). (6) Marital status An individual's marital status shall be determined in accordance with section 7703. (d) Denial and recapture rules in case of disposal of residence within 6 taxable years (1) Denial of credit in case of disposal within taxable year (A) In general No credit under subsection (a) shall be allowed to any taxpayer for any taxable year with respect to the purchase of a residence if the taxpayer disposes of their interest in such residence (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) before the close of such taxable year. (B) Recapture in cases of credit transfer In the case of a taxpayer which— (i) has made an election under subsection (g)(1), and (ii) disposes of their interest in such residence (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) before the close of the taxable year described in subparagraph (A), the tax imposed by this chapter for the taxable year in which such disposal (or cessation) occurs shall be increased by an amount equal to 100 percent of the amount of the credit allowed under subsection (a). (2) Phased-out recapture (A) In general Except as provided in subparagraph (D), if the taxpayer disposes of their interest in a residence with respect to which a credit was allowed under subsection (a) (or such residence ceases to be the principal residence of the taxpayer (and, if married, the taxpayer's spouse)) during the 5-taxable-year period beginning with the taxable year immediately following the credit year, the tax imposed by this chapter for the taxable year in which such disposal (or cessation) occurs shall be increased by an amount equal to the recapture percentage of the amount of the credit so allowed. (B) Credit year For purposes of subparagraph (A), the term credit year means the taxable year in which the credit under subsection (a) was allowed. (C) Recapture percentage For purposes of subparagraph (A), the recapture percentage with respect to any disposal or cessation described in such subparagraph shall be determined in accordance with the following table: If the disposal or The recapture cessation occurs in: percentage is: The 1st taxable year beginning after the credit year 100 percent The 2nd taxable year beginning after the credit year 80 percent The 3rd taxable year beginning after the credit year 60 percent The 4th taxable year beginning after the credit year 40 percent The 5th taxable year beginning after the credit year 20 percent. (D) Exceptions This paragraph shall not apply in the case of a disposal or cessation described in subparagraph (A) which occurs after or incident to any of the following: (i) Death of the taxpayer or the taxpayer's spouse. (ii) Divorce or separation of the taxpayer. (iii) Involuntary conversion of the residence (within the meaning of section 121(d)(5)(A)). (iv) Relocation of duty station or qualified official extended duty (as defined in section 121(d)(9)(C)) of the taxpayer or the taxpayer's spouse who is a member of the uniformed services (as defined in section 121(d)(9)(C)(ii)), a member of the Foreign Service of the United States (as defined in section 121(d)(9)(C)(iii)), or an employee of the intelligence community (as defined in section 121(d)(9)(C)(iv)). (v) Change of employment of the taxpayer or the taxpayer's spouse which meets the conditions of section 217(c). (vi) Change in the number of people residing in the residence of the taxpayer, including the addition of a child. (vii) Loss of employment, health conditions, caregiving needs, or such other unforeseen circumstances as may be specified by the Secretary. (e) Adjustment to basis For purposes of this subtitle, if a credit is allowed under this section with respect to any property, the taxpayer's basis in such property shall be reduced by the amount of the credit so allowed. (f) Reporting (1) In general A credit shall be allowed under this section only if the following are included on the return of tax: (A) The individual's social security number issued by the Social Security Administration. (B) The street address (not including a post office box) of the principal residence purchased. (C) The purchase price of the principal residence. (D) The date of purchase of the principal residence. (E) The closing disclosure relating to the purchase (in the case of a purchase financed by a mortgage). (2) Reporting of real estate transactions If the Secretary requires information reporting under section 6045 by a person described in subsection (e)(2) thereof to verify the eligibility of taxpayers for the credit allowable by this section, the exception provided by section 6045(e)(5) shall not apply. (g) Transfer of credit (1) In general Subject to such regulations or other guidance as the Secretary determines necessary, if the taxpayer who acquires a principal residence by purchase using a qualified residential mortgage loan elects the application of this subsection with respect to such residence, 100 percent of the credit which would (but for this subsection) be allowed to such taxpayer with respect to such residence shall, at the time of purchase of such residence, be allowed to the eligible entity specified in such election (and not to such taxpayer) in the manner described in paragraph (2)(A)(ii)(III). (2) Definitions In this subsection— (A) Eligible entity (i) In general The term eligible entity means, with respect to the residence for which the credit is allowed under subsection (a), the entity which originated the qualified residential mortgage loan used to purchase such residence and— (I) has registered with the Secretary for purposes of this subparagraph, at such time, and in such form and manner, as the Secretary may prescribe, (II) employs registered loan originators or state-licensed loan originators, (III) prior to the election described in paragraph (1) and not later than the closing date for such purchase, disclosed to the taxpayer purchasing such residence— (aa) the amount of the credit that would otherwise be allowable to the taxpayer under subsection (a), (bb) pursuant to the election under paragraph (1), the amount of the credit allowed to such entity, (cc) the terms of the qualified residential mortgage loan, which shall take into account the payment made by such entity pursuant to subclause (V), (IV) prior to the closing date for such purchase and in such manner as the Secretary may prescribe, verified— (aa) the eligibility of the taxpayer for the credit under subsection (a), and (bb) the amount of such credit to which the election under paragraph (1) is applicable, (V) on the closing date for the purchase of the residence, reduces the down payment otherwise required to be made by the taxpayer by making payment to the person selling such residence to the taxpayer in an amount equal to the amount of the credit allowable to the taxpayer under subsection (a) to which the election under paragraph (1) applies, and (VI) has not provided any terms or conditions (such as higher fees, closing costs, interest rates, or other incentives) with respect to the qualified residential mortgage loan to which an election under paragraph (1) applies which are less favorable than the terms and conditions for residential mortgage loans that would otherwise be provided to the taxpayer if an election described in such paragraph was not made by the taxpayer. (ii) Special rules (I) Timing; revocation Rules similar to the rules under paragraphs (3) and (4) of section 30D(g) shall apply for purposes of this subparagraph. (II) Tax treatment of payments With respect to any payment described in clause (i)(V), such payment— (aa) shall not be includible in the gross income of the taxpayer, and (bb) with respect to the eligible entity, shall not be deductible under this title. (III) Advance payment to eligible entities (aa) In general The Secretary shall establish a program to make advance payments to any eligible entity in an amount equal to the cumulative amount of the credits allowed to such entity pursuant to an election under paragraph (1). (bb) Excessive payments; treatment of advance payments Rules similar to the rules under subparagraphs (B) and (C) of section 30D(g)(7) shall apply for purposes of this subclause. (IV) Recapture In the case of any taxpayer who has made an election described in paragraph (1) with respect to the purchase of a principal residence and for which a payment described in clause (i)(V) was made by an eligible entity, if the credit under subsection (a) is subsequently determined to not be allowable to such taxpayer with respect to such purchase, the tax imposed on such taxpayer under this chapter for the taxable year in which such residence was purchased shall be increased by the amount of the payment described in clause (i)(V). (B) Qualified residential mortgage loan The term qualified residential mortgage loan means a residential mortgage loan (as defined in section 1503 of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5102)) which— (i) does not exceed the conforming loan limit (as defined in subsection (b)(2)), (ii) was originated by a registered loan originator or State-licensed loan originator (as defined in section 1503 of the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. 5102)) who is not, with respect to the taxpayer— (I) a person specified in section 267(b), or (II) a partnership described in section 707(b), and (iii) does not require a down payment in an amount which is greater than the amount equal to— (I) 20 percent of the purchase price of the residence, minus (II) the amount of the credit allowable to the taxpayer under subsection (a) to which the election under paragraph (1) applies. (3) Application of limitation based on modified adjusted gross income (A) In general (i) Prior taxable year For purposes of this subsection, any reduction in the amount allowable as a credit under subsection (a) pursuant to subsection (b)(3) shall be determined based on the modified adjusted gross income of the taxpayer for the taxable year described in subparagraph (D)(ii) of such subsection. (ii) Individuals who were not married in prior taxable year For purposes of clause (i), in the case of two individuals who are married during the taxable year in which the residence is purchased but were not married with respect to the taxable year described in such clause, rules similar to the rules under subsection (b)(5)(B) shall apply. (B) Lower income in taxable year in which residence is purchased (i) In general If— (I) the taxpayer has made an election under paragraph (1), (II) a reduction described in subparagraph (A) is applicable with respect to the amount allowable as a credit under subsection (a), and (III) the modified adjusted gross income of the taxpayer for the taxable year described in clause (i) of subsection (b)(3)(D) is less than the modified adjusted gross income of the taxpayer for the taxable year described in clause (ii) of such section, notwithstanding the application of paragraph (1), there shall be a credit allowed to the taxpayer against the tax imposed by this subtitle for the taxable year described in clause (i) of such subsection equal to the amount described in clause (ii). (ii) Difference in credit amounts The amount described in this clause is equal to— (I) the amount allowable as a credit under subsection (a), as reduced pursuant to subsection (b)(3) based on the modified adjusted gross income of the taxpayer for the taxable year described in clause (i) of subsection (b)(3)(D), minus (II) the amount of the payment made by the eligible entity pursuant to paragraph (2)(A)(i)(V). (4) Reporting (A) In general In the case of a taxpayer that has made an election under paragraph (1), not later than 3 days after the closing date for the purchase of the residence, the eligible entity shall report to the Secretary (in such manner as the Secretary may prescribe) the following: (i) The name and taxpayer identification number of the taxpayer. (ii) The amount of the credit allowed under subsection (a) to which the election under paragraph (1) applied. (B) Information provided to taxpayer At such time, and in such form and manner, as the Secretary may prescribe, the eligible entity shall provide the information described in subparagraph (A) to the taxpayer. (5) Online portal The Secretary shall establish an online portal which permits— (A) a taxpayer to— (i) determine the amount of the credit allowable under subsection (a) and the amount of such credit to which paragraph (1) may apply, and (ii) elect the application of this subsection with respect to the purchase of a residence, and (B) an eligible entity to— (i) verify the amount of the credit allowable under subsection (a) with respect to the taxpayer and the amount of such credit to which paragraph (1) may apply, and (ii) comply with the requirements under paragraph (4). (h) Regulations and guidance The Secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including rules for the application of subsection (d) in the case of a residence purchased by 2 or more individuals who are not married.. (b) Conforming amendment relating to basis adjustment Subsection (a) of section 1016 of the Internal Revenue Code of 1986, as amended by section 212, is amended— (1) by redesignating paragraphs (38) and (39) as paragraphs (39) and (40), respectively, and (2) by inserting after paragraph (37) the following new paragraph: (38) to the extent provided in section 36(e),. (c) Conforming amendment Section 26(b)(2) of the Internal Revenue Code of 1986 is amended by striking subparagraph (W) and by redesignating subparagraphs (X), (Y), and (Z) as subparagraphs (W), (X), and (Y), respectively. (d) Clerical amendment The item relating to section 36 in the table of sections for subpart C of part IV of subchapter A of chapter 1 of the Internal Revenue Code of 1986 is amended to read as follows: Sec. 36. First-time homebuyer refundable credit.. (e) Authority To treat claim of credit as error, etc Subparagraph (N) of section 6213(g)(2) of the Internal Revenue Code of 1986 is amended to read as follows: (N) in the case of a return claiming the credit under section 36— (i) the omission of a social security number required under section 36(f)(1)(A), (ii) the inclusion of a social security number so required if— (I) the claim of the credit on the return reflects the treatment of such individual as being of an age different from the individual's age based on such social security number, or (II) except as provided in section 36(c)(1)(B), such social security number has been included (other than as a dependent for purposes of section 151) on a return for any previous taxable year claiming any credit or deduction described in section 36(c)(1)(A)(i), (iii) the omission of any other required information or documentation described in section 36(f)(1), including the inclusion of a post office box instead of a street address for the purchased residence, (iv) the inclusion of any information or documentation described in clause (iii) if such information or documentation does not support a valid claim for the credit, or (v) a claim of such credit for a taxable year with respect to the purchase of a residence made after the last day of such taxable year,. (f) IRS recordkeeping Notwithstanding the limitations on assessment and collection under section 6501 of the Internal Revenue Code of 1986, the Commissioner of Internal Revenue shall maintain records of returns and return information (as defined in section 6103(b)(2) of such Code) of any taxpayer claiming the credit under section 36 of such Code (as amended by this section) for the taxable year in which such credit is claimed and succeeding taxable years in the individual master files of the Internal Revenue Service. (g) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2026.