H.R. 7160

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 7160 Introduced in House (IH)]

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119th CONGRESS
2d Session
H. R. 7160

To amend the Internal Revenue Code of 1986 to establish the first-time 
homebuyer refundable tax credit.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

January 20, 2026

Mr. Krishnamoorthi introduced the following bill; which was referred to 
the Committee on Ways and Means

_______________________________________________________________________

A BILL

To amend the Internal Revenue Code of 1986 to establish the first-time 
homebuyer refundable tax credit.

Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``First Home Affordability Act''.

SEC. 2. FIRST-TIME HOMEBUYER REFUNDABLE TAX CREDIT.

(a) In General.--Section 36 of the Internal Revenue Code of 1986 is 
amended to read as follows:

``SEC. 36. FIRST-TIME HOMEBUYER CREDIT.

``(a) Allowance of Credit.--In the case of an eligible individual, 
there shall be allowed as a credit against the tax imposed by this 
subtitle a credit in an amount equal to the applicable credit amount 
for the taxable year.
``(b) Eligible Individual.--For purposes of subsection (a), the 
term `eligible individual' means, with respect to any taxable year, an 
individual who is a first-time homebuyer with respect to the purchase 
of a principal residence in the United States during such taxable year 
or any of the 4 preceding taxable years.
``(c) Applicable Credit Amount.--
``(1) In general.--For purposes of subsection (a), the term 
`applicable amount' means, with respect to any taxable year 
which occurs during the credit period of an eligible 
individual, an amount equal to--
``(A) 10 percent of the purchase price of the 
primary residence described in subsection (b), divided 
by
``(B) 5.
``(2) Dollar limitation.--
``(A) In general.--Except as otherwise provided in 
this paragraph, the aggregate amount of all credits 
allowed to any taxpayer allowed with respect to a 
single purchase of a primary residence shall not exceed 
$25,000.
``(B) Married individuals filing separately.--In 
the case of a married individual filing a separate 
return, subparagraph (A) shall be applied by 
substituting `$12,500' for `$25,000'.
``(C) Other individuals.--If 2 or more individuals 
who are not married purchase a principal residence, the 
amount of the credit allowed under subsection (a) shall 
be allocated among such individuals in such manner as 
the Secretary may prescribe, except that the aggregate 
amount of the credits allowed to all such individuals 
with respect to such purchase during the credit period 
with respect to such purchase shall not exceed $25,000.
``(3) Phaseout based on area median income.--
``(A) In general.--The amount allowable as a credit 
under subsection (a) (determined without regard to this 
paragraph) 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 modified adjusted gross 
income of the taxpayer for the taxable 
year in which the taxpayer makes the 
purchase of the principal residence 
with respect to which the credit is 
allowed, over
``(II) 150 percent of the 
applicable Area Medium Income, bears to
``(ii) 20 percent of the applicable Area 
Median Income.
``(B) Modified adjusted gross income.--For purposes 
of subparagraph (A), the term `modified adjusted gross 
income' means the adjusted gross income of the taxpayer 
for the taxable year increased by any amount excluded 
from gross income under section 911, 931, or 933.
``(C) Applicable area median income.--For purposes 
of subparagraph (A), the term `applicable Area Median 
Income' means the Area Median Income set by the 
Secretary of Housing and Urban Development with respect 
to--
``(i) the area in which the principal 
residence is located,
``(ii) the size of the household of the 
taxpayer, and
``(iii) the calendar year in which the 
principal residence is purchased.
``(4) Limitation based on area median purchase price.--
``(A) In general.--The amount allowable as a credit 
under subsection (a) (determined without regard to this 
paragraph) 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 purchase price of the 
principal residence, over
``(II) the amount which is equal to 
110 percent of the area median purchase 
price, bears to
``(ii) the amount which is equal to 15 
percent of the area median purchase price.
``(B) Area median purchase price.--For purposes of 
this paragraph, the term `area median purchase price' 
means the median purchase price for a home in both the 
area and the calendar year in which the purchase of the 
principal residence takes place.
``(C) Regulations and guidance.--The Secretary, 
after consultation with the Secretary of Housing and 
Urban Development, shall promulgate such regulations 
and guidance as are necessary to carry out the purposes 
of this subparagraph, including for determining the 
area median purchase price with respect to different 
localities.
``(D) Inflation adjustment.--In the case of any 
taxable year beginning in a calendar year after 2025, 
each of the dollar amounts in paragraph (1) shall be 
increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) 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 2024' 
for `calendar year 2016' in subparagraph 
(A)(ii) thereof.
Any increase determined under the preceding sentence 
shall be rounded to the nearest multiple of $100.
``(E) Age limitation.--No credit shall be allowed 
under subsection (a) with respect to the purchase of 
any residence unless the taxpayer has attained age 18 
as of the date of such purchase. In the case of any 
taxpayer who is married (within the meaning of section 
7703), the taxpayer shall be treated as meeting the age 
requirement of the preceding sentence if the taxpayer 
or the taxpayer's spouse meets such age requirement.
``(5) Regulations and guidance.--The Secretary, in 
consultation with the Secretary of Housing and Urban 
Development, shall issue such regulations and guidance as are 
necessary to carry out the purposes of this subparagraph.
``(d) Credit Period.--
``(1) In general.--For purposes of this section, the term 
`credit period' means, with respect to any individual, the 5 
taxable year period beginning with the taxable year during 
which such individual makes a purchase described in subsection 
(b).
``(2) Special rule for teachers, childcare workers, and 
first responders.--
``(A) In general.--In the case of an eligible 
individual whose primary occupation during the taxable 
year in which such individual makes a purchase 
described in subsection (b) is first responder, 
childcare worker, or teacher--
``(i) the credit period with respect to 
such purchase shall be the taxable year in 
which such purchase is made, and
``(ii) the applicable amount shall be 10 
percent of the purchase price of the primary 
residence described in subsection (b).
``(B) First responder.--For purposes of this 
paragraph, the term `first responder' means an 
individual who is--
``(i) a law enforcement officer, 
firefighter, or member of a rescue squad or 
ambulance crew (as such terms are defined in 
section 1204 of title I of the Omnibus Crime 
Control and Safe Streets Act of 1968), or
``(ii) a public safety telecommunicator, 
including a 9-1-1 operator or dispatcher.
``(C) Childcare worker.--For purposes of this 
paragraph, the term `childcare worker' means an 
individual--
``(i) who has a credential or a license 
under State law for early childhood education, 
and
``(ii) whose primary responsibility is for 
the learning and development of children in an 
early childhood education program.
``(D) Teacher.--For purposes of this paragraph, the 
term `teacher' means an individual who--
``(i) is an elementary school or secondary 
school teacher who, as determined by the State 
or local educational agency, is a teacher of 
record who provides direct classroom teaching 
(or classroom-type teaching in a no classroom 
setting) to students in an elementary or 
secondary school, and
``(ii) meets applicable State certification 
and licensure requirements, including any 
requirements for certification obtained through 
alternative routes to certification, in the 
State in which such school is located and in 
the subject area in which the individual is the 
teacher of record.
``(e) Definitions.--For purposes of this section--
``(1) First-time homebuyer.--The term `first-time 
homebuyer' means any individual if such individual (and if 
married, such individual's spouse)--
``(A) has no present ownership interest in any 
residence during the 3-year period ending on the date 
of the purchase of the principal residence to which 
this section applies, and
``(B) has not taken the credit under this section 
in any other taxable year.
``(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 married, such individual's 
spouse),
``(ii) the acquisition is financed through 
a federally backed mortgage loan (as defined in 
section 4022 of the CARES Act), and
``(iii) 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) 
(relating to property acquired from a 
decedent).
``(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 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).
``(f) Exceptions.--No credit under subsection (a) shall be allowed 
to any taxpayer for any taxable year with respect to the purchase of a 
residence if--
``(1) the taxpayer disposes of 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,
``(2) a deduction under section 151 with respect to such 
taxpayer is allowable to another taxpayer for such taxable 
year, or
``(3) the taxpayer fails to attach to the return of tax for 
such taxable year a properly executed copy of the settlement 
statement used to complete such purchase.
``(g) Reporting.--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.
``(h) Recapture of Credit.--
``(1) In general.--Except as otherwise provided in this 
subsection, if, during any taxable year during the credit 
period, a taxpayer disposes of the principal residence with 
respect to which a credit was allowed under subsection (a) (or 
such residence ceases to be the principal residence of the 
taxpayer), the tax imposed by this chapter for such taxable 
year shall be increased by the recoverable amount determined in 
paragraph (2).
``(2) Recoverable amount.--For purposes of paragraph (1), 
the recoverable amount is the product of--
``(A) 25 percent of the amount of the credit 
allowed under subsection (a) in all taxable years with 
respect to the same purchase, multiplied by
``(B) the number of taxable years remaining in the 
recapture period as of the beginning of the taxable 
year in which the taxpayer disposes of the principal 
residence.
``(3) Limitation based on gain.--In the case of the sale of 
the principal residence to a person who is not related to the 
taxpayer, the increase in tax determined under paragraph (1) 
shall not exceed the amount of gain (if any) on such sale. 
Solely for purposes of the preceding sentence, the adjusted 
basis of such residence shall be reduced by the amount of the 
credit allowed under subsection (a).
``(4) Exceptions.--
``(A) Death of a taxpayer.--Paragraph (1) shall not 
apply to any taxable year ending after the date of the 
taxpayer's death.
``(B) Involuntary conversion.--Paragraph (1) shall 
not apply in the case of a residence which is 
compulsorily or involuntarily converted (within the 
meaning of section 1033(a)) if the taxpayer acquires a 
new principal residence during the 2-year period 
beginning on the date of the disposition or cessation 
referred to in paragraph (1). Paragraph (1) shall apply 
to such new principal residence during the recapture 
period in the same manner as if such new principal 
residence were the converted residence.
``(C) Transfers between spouses or incident to 
divorce.--In the case of a transfer of a residence to 
which section 1041(a) applies--
``(i) paragraph (1) shall not apply to such 
transfer, and
``(ii) in the case of taxable years ending 
after such transfer, paragraph (1) shall apply 
to the transferee in the same manner as if such 
transferee were the transferor (and shall not 
apply to the transferor).
``(D) Special rule for members of the armed forces, 
etc.--
``(i) In general.--In the case of the 
disposition of a principal residence by an 
individual (or a cessation referred to in 
paragraph (1)) after December 31, 2022, in 
connection with Government orders received by 
such individual, or such individual's spouse, 
for qualified official extended duty service, 
paragraph (1) and subsection (d)(2) shall not 
apply to such disposition (or cessation).
``(ii) Qualified official extended duty 
service.--For purposes of this section, the 
term `qualified official extended duty service' 
means service on qualified official extended 
duty as--
``(I) a member of the uniformed 
services,
``(II) a member of the Foreign 
Service of the United States, or
``(III) an employee of the 
intelligence community.
``(iii) Definitions.--Any term used in this 
subparagraph which is also used in paragraph 
(9) of section 121(d) shall have the same 
meaning as when used in such paragraph.
``(E) Disposition of residence in connection with 
change of employment.--In the case of the disposition 
of a principal residence by an individual (or a 
cessation referred to in paragraph (1)) after December 
31, 2022, in connection with a change of employment 
which meets the conditions described in section 217(c), 
paragraph (1) shall not apply to such disposition (or 
cessation).
``(5) Joint returns.--In the case of a credit allowed under 
subsection (a) with respect to a joint return, half of such 
credit shall be treated as having been allowed to each 
individual filing such return for purposes of this subsection.
``(6) Return requirement.--If the tax imposed by this 
chapter for the taxable year is increased under this 
subsection, the taxpayer shall, notwithstanding section 6012, 
be required to file a return with respect to the taxes imposed 
under this subtitle.
``(i) Transfer of Credit.--
``(1) In general.--Subject to such regulations and other 
guidance as the Secretary determines necessary, a taxpayer may 
elect that the credit which would (but for this subsection) be 
allowed to such taxpayer with respect to the purchase of a 
principal residence in the taxable year in which the taxpayer 
makes such purchase shall be allowed to the mortgage lender 
with respect to such purchase and not to such taxpayer.
``(2) Eligible entity.--For purposes of this subsection, 
the term `eligible entity' means, with respect to the purchase 
of the principal residence for which the credit is allowed 
under subsection (a), the mortgage lender which provides the 
mortgage to the taxpayer and has--
``(A) registered with the Secretary for purposes of 
this paragraph, at such time, and in such form and 
manner, as the Secretary may prescribe,
``(B) prior to the election described in paragraph 
(1) and not later than at the time of such purchase, 
disclosed to the taxpayer making such purchase--
``(i) the value of the credit allowed under 
subsection (a), and
``(ii) the amount provided by the mortgage 
lender to such taxpayer as a condition of the 
election described in paragraph (1).
``(C) not later than at the time of such purchase, 
made payment to such taxpayer (whether in cash or in 
the form of a partial payment or down payment for the 
purchase of such principal residence) in an amount 
equal to the credit otherwise allowable to such 
taxpayer, and
``(D) with respect to any incentive otherwise 
available for taking a mortgage for which a credit is 
allowed under this section, including any incentive in 
the form of a rebate or discount provided by the 
mortgage lender, ensured that--
``(i) the availability or use of such 
incentive shall not limit the ability of a 
taxpayer to make an election described in 
paragraph (1), and
``(ii) such election shall not limit the 
value or use of such incentive.
``(3) Timing.--An election described in paragraph (1) shall 
be made by the taxpayer not later than the date on which the 
purchase of the principal residence with respect to which the 
credit under subsection (a) is allowed is made.
``(4) Revocation of registration.--Upon determination by 
the Secretary that a mortgage lender has failed to comply with 
the requirements described in paragraph (2), the Secretary may 
revoke the registration (as described in subparagraph (A) of 
such paragraph) of such mortgage lender.
``(5) Tax treatment of payments.--With respect to any 
payment described in paragraph (2)(C), such payment--
``(A) shall not be includible in the gross income 
of the taxpayer, and
``(B) with respect to the mortgage lender, shall 
not be deductible under this title.
``(6) Advance payment to mortgage lenders.--
``(A) 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 under subsection (a) with respect to 
any mortgages issued by such entity for which an 
election described in paragraph (1) has been made.
``(B) Excessive payments.--Rules similar to the 
rules of section 6417(d)(6) shall apply for purposes of 
this paragraph.
``(C) Treatment of advance payments.--For purposes 
of section 1324 of title 31, United States Code, the 
payments under subparagraph (A) shall be treated in the 
same manner as a refund due from a credit provision 
referred to in subsection (b)(2) of such section.
``(7) 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 received a payment 
described in paragraph (2)(C) from an eligible entity, such 
principal residence shall be treated as a principal residence 
with respect to which a credit was allowed under subsection (a) 
for purposes of subsection (f).''.
(b) Certain Errors With Respect to First-Time Homebuyer Tax Credit 
Treated as Mathematical or Clerical Errors.--Paragraph (2) of section 
6213(g) of the Internal Revenue Code of 1986, as amended by Public Law 
119-21, is amended by striking ``and'' at the end of subparagraph (Z), 
by striking the period at the end of subparagraph (AA) and inserting 
``, and'', and by inserting after subparagraph (AA) the following new 
subparagraph:
``(BB) an entry on a return claiming the credit 
under section 36 if--
``(i) the Secretary obtains information 
from the person issuing the TIN of the taxpayer 
that indicates that the taxpayer does not meet 
the age requirement of section 36(b)(4),
``(ii) information provided to the 
Secretary by the taxpayer on an income tax 
return for at least one of the 2 preceding 
taxable years is inconsistent with eligibility 
for such credit, or
``(iii) the taxpayer fails to attach to the 
return the form described in section 
36(f)(3).''.
(c) Effective Date.--The amendments made by this section shall 
apply with respect to principal residences purchased after the date of 
the enactment of this Act.
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