Quick Answer: What Tax Benefits Exist for First-Time Buyers?

While there's no federal first-time home buyer tax credit currently, you can benefit from: mortgage interest deduction (up to $750K loan), property tax deduction (up to $10K), mortgage credit certificates (MCC) in some states, and various state-specific programs offering down payment assistance and tax credits.

No current federal tax credit for first-time buyers (programs expired in 2010)
Mortgage interest and property taxes are deductible if you itemize
Mortgage Credit Certificates (MCC) provide annual tax credits in participating states
State and local programs offer down payment assistance and tax benefits
First-time buyer is often defined as not owning a home in the past 3 years

Current Tax Benefits for Homeowners

Federal Tax Deductions

Deduction	Limit	Notes
Mortgage Interest	Up to $750K loan	Must itemize deductions
Property Taxes	Up to $10,000	Combined with state/local income taxes
Mortgage Points	Deductible	Year paid or over loan life
Home Office	Actual expenses	If self-employed

Who Benefits from Deductions?

Standard deduction (2026): $14,600 single / $29,200 married
Itemize only if total deductions exceed standard
Higher income, higher mortgage = more likely to benefit

Mortgage Credit Certificates (MCC)

What Is an MCC?

Federal program administered by states
Converts portion of mortgage interest to tax credit
Credit of 10-50% of interest paid annually
Remaining interest still deductible

MCC Example

Item	Amount
Mortgage	$300,000
Interest paid (Year 1)	$18,000
MCC rate	20%
Tax credit	$3,600
Remaining deductible	$14,400

MCC Eligibility

First-time home buyer (usually)
Income limits (typically 80-140% of area median)
Home price limits
Must be primary residence
Participating lenders only

State & Local Programs

Types of Programs

Type	Description
Down payment grants	Free money, no repayment
Low-interest loans	Second mortgages at favorable rates
Tax credits	Annual credits on state taxes
Forgivable loans	Forgiven after X years in home
Matched savings	Programs match your savings

Finding Programs in Your State

State Housing Finance Agency (search: “[state] HFA”)
HUD.gov - Local homebuying programs
Local city/county - Often have additional programs

Example Programs (2026)

California: CalHFA offers down payment assistance
Texas TSAHC provides grants and tax credits
New York: SONYMA has low-rate mortgages
Florida: HFA programs statewide

Tax Deductions at Closing

What You Can Deduct

Mortgage points - Deductible in year paid (if primary residence)
Property taxes - Prorated amount paid at closing
Mortgage interest - Any prepaid interest

What You Cannot Deduct

Appraisal fees
Inspection fees
Title insurance
Recording fees
Most closing costs

Planning Your Tax Benefits

Year 1 Considerations

Closing may happen mid-year
Partial year of deductions
Points deduction may be significant
Consider timing of closing

Long-Term Planning

Deductions become more valuable as interest portion increases
Property taxes typically increase over time
Consider future income changes

How to Claim Benefits

File Schedule A (Itemized Deductions)
Report mortgage interest from Form 1098
Report property taxes paid
Deduct points (Form 1098 or separate)
For MCC: File Form 8396

First-Time Home Buyer Tax Credits 2026: Complete Guide