Routing # 256078446
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First-Time Homebuyer Tax Credits
What you'll learn: The tax credits first-time homebuyers can take advantage of and how.
EXPECTED READ TIME: 3 MINUTES
March 5, 2025
The federal first-time homebuyer tax credit program was offered to qualifying homeowners. Though the program is no longer available, there are still a number of other federal and state relief incentives that first-time buyers can use to their benefit.
From grants to tax deductions, we will discuss what these programs are and how they can be a big benefit of homeownership for first-time buyers.
What are first-time homebuyer tax credits and benefits?
There are various deductions and tax benefits available to new homeowners. If you bought a home in the last year that is your primary residence, then these tax deductions may be available for you to take advantage of:
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Property taxes: Annual or semiannual charge paid by homeowners to their local and state government, based on the value of the home. You can deduct these taxes and receive a return of up to $10,000 so long as you itemize your deductions.
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Mortgage interest: Homeowners can deduct interest paid on the first $750,000 of their mortgage debt for their primary or secondary residences. Deductions must be itemized on your tax return.
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Mortgage points: If you used mortgage points to lower your interest rate on a home purchase within the tax year, then the IRS will allow you to deduct the amount you paid for the points for that year.
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Home office expenses: Homeowners who operate a small business or are self-employed freelancers can claim a deduction or write-off their home office expenses on their tax return.
Unlike the first-time homebuyer tax credit, which was worth up to $8,000 while it was still available, tax deductions are simply meant to lessen the amount of your taxable income. It is also important to note that you are required to itemize deductions on your tax return, and they will not be automatically applied otherwise.
What is the energy efficient home improvement tax credit?
One tax credit that is available to homeowners is known as the energy efficient home improvement credit. This tax benefit is available to homeowners who have invested in qualifying energy efficient improvements in their home any time after January 1, 2023. And there is no lifetime limit on how many years you can claim this credit. This means, if you made qualifying improvements in 2024, then you can make more improvements in 2025 and claim the tax credit again next year.
Who qualifies?
You do not have to be a first-time buyer to qualify for the energy efficient home improvements tax credit. However, the improvements must be made to your primary residence, not second homes or investment properties. As of 2025, the improvements that require item installations must be produced by a qualified manufacturer. As the taxpayer, you will need to provide the qualified product identification number (QPIN) for said item on your tax return in order to receive the tax credit.
The full list of qualifiers and types of home improvements that are covered by the tax credit can be found on the IRS website.
Explore more first-time buyer savings
If you are just starting to dive into the homebuying process, tax credits and deductions are not the only money-saving benefits available to first-time homebuyers. Many programs, loans, and types of assistance are available to buyers who are looking for a little extra help saving money when it comes to buying their first home. Here are a few to get started with:
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Down payment assistance programs (DPA): Helps homebuyers who may not be able to cover the full cost of a down payment when buying a home. DPA programs often vary depending on your location as they are more commonly funded by state and county government branches. They can come in the form of grants, forgivable loans, low-interest loans, matched savings programs, and more.
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Mortgage credit certificates: Provides borrowers with the ability to claim a tax refund, typically up to $2,000. The exact amount of the refund you receive will depend on your mortgage interest, and you will have to check with your state’s finance agency to see if you meet the qualifications.
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FHA loans: If you are new to the homebuying process, it may be worth it to look into how an FHA loan can help you become a homeowner. Thanks to their low down payment options, FHA loans can make buying your first home much more affordable compared to other mortgage types.
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VA loans: If you are a veteran or servicemember, your benefits afford you the ability to use a VA loan for your home purchase.
Becoming a homeowner may be the most significant purchase you make in your life, but it also comes with a number of benefits. Whether you are on the hunt for ways to save when buying, or interested in the types of tax benefits available to you, be sure to consult with a financial professional to see what options are out there.
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Home Buying Steps
Mortgage Products
Disclosures
1Conventional Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 75%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
2FHA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.0 discount point, which equals 1.0 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $400,000; loan-to-value ratio of 96.5%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
3VA Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 1.125 discount point, which equals 1.125 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, conforming, fixed-rate loan. Loan amount of $450,000; loan-to-value ratio of 95%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of $995.
4Jumbo Loans
Except for holidays, rates are updated Monday through Friday at 10:15am EST. The advertised rates and points are subject to change. The information provided is based on 0.5 discount point, which equals 0.5 percent of the loan amount, and assumes the purpose of the loan is to purchase a property with a 30-year, non-conforming, fixed-rate loan. Loan amount of $1,009,000; loan-to-value ratio of 70%; credit score of 760; and DTI of 18% or less. The property is an existing single-family home and will be used as a primary residence. The advertised rates are based on certain assumptions and loan scenarios, and the rate you may receive will depend on your individual circumstances, including your credit history, loan amount, down payment, and our internal credit criteria. Other rates, points, and terms may be available. All loans are subject to credit and property approval.
Rates quoted require a loan origination fee of 1%; not to exceed $1,995. Speak to a PenFed Mortgage Loan Officer for additional details.
Fixed Rate Advance Lock-In You may lock in an Annual Percentage Rate for Advances during the Advance Period. During your Advance Period, you may choose to have three separate Fixed Rate Advances locked in at any one time, with a maximum of two new Fixed Rate Advances per calendar year. Each Fixed Rate Advance must equal or exceed Ten Thousand Dollars ($10,000.00) and you may not request a Fixed Rate Advance that would cause the amount you owe to exceed your Credit Limit. The only term option for your Fixed Rate Advance is 240 months (“Fixed Rate Advance Term”). However, the term of your Fixed Rate Advance cannot exceed your Repayment Period.
Routing #256078446
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