Buying your first home involves important financial decisions, and understanding the tax credits and incentives available to you can make a big difference. Although federal programs have changed over the years, there are still several tax benefits and assistance options that can help reduce the cost of homeownership in 2026. Whether you’re buying a home in Denver or Orlando, this Redfin real estate guide details what first-time buyers need to know about the tax credits and incentives available in 2026.
What qualifies me as a first-time home buyer?
For most programs, you are considered a first-time homebuyer if you have not owned your primary residence within the past three years. This definition applies to many state and local assistance programs as well as certain federally sponsored options.
Even if you’ve owned real estate in the past, you’ll still qualify as long as you haven’t recently owned a home.
There are tax benefits for first-time buyers.
Although the federal first-time homebuyer tax credit will not go into effect in 2026, there are still some tax benefits to homeownership. Understanding how these deductions and credits work can help you estimate potential savings and make more informed financial decisions before making a purchase.
“Potential buyers should ask what exemptions and contributions the seller has and get an estimate of what their taxes will be,” said Hawaii County Real Estate Tax Administrator Lisa Miura. “If the buyer does not intend to live in the property, other programs are available, such as agricultural or long-term rentals.”
Mortgage interest deduction
Homeowners who itemize deductions can deduct mortgage interest paid on qualified mortgages, subject to IRS limitations. This can reduce your taxable income, especially in the early stages of a mortgage when interest payments are higher.
Fixed asset tax deduction
State and local property taxes may be deducted subject to current federal state and local tax deduction limits.
mortgage credit certificate
Some state and local housing finance agencies offer a Mortgage Credit Certificate called an MCC. These allow eligible buyers to convert a portion of their annual mortgage interest rate into a dollar-for-dollar federal tax credit, up to a maximum amount. This allows eligible homeowners to realize ongoing annual tax savings.
“Buyers should contact their state housing finance agency to confirm MCC availability and reserve a certificate before signing a purchase contract,” says EA’s Mike Habib. “If you close without securing collateral, you permanently lose federal credit for the home. It’s also important to crunch the numbers to make sure the bullet points make sense and keep a complete closing file, including the MCC certificate, closing disclosure, and Form 1098. Most of the problems I’ve seen could have been avoided with a short conversation before closing, rather than after the tax return was filed.”
State and local first-time homebuyer incentives
Although federal credits are not currently available, many state and local governments offer financial assistance programs designed specifically for first-time buyers.
These programs may include:
Down payment subsidies Forgiven loans Low-interest second mortgages Closing cost subsidies State-level tax credits
Eligibility often depends on income limits, purchase price limits, and whether the home is located in a qualifying area.
Programs vary widely by state and city, so buyers should check with their state housing finance agency or local housing authority to find out what options are available to them.
Canada’s first-time homebuyer program
“Many first-time buyers assume that all home buying programs work the same way, but the rules can vary significantly,” says Clayton Archen, CPA and managing partner at Archen Henderson CPAs. “For example, First Home Savings Accounts and Home Buyers Plans are often confused. While FHSA withdrawals are generally non-refundable and tax-free, HBP withdrawals from RRSPs typically have to be repaid over time. Buyers also often overlook timing requirements and assume that once they qualify for one program, they automatically qualify for the other.”
“A common problem is that eligibility rules vary from program to program, especially when it comes to defining first-time homebuyers. Income limits, purchase price thresholds, occupancy requirements, and documentation all impact access to credits, rebates, and incentive programs. In practice, buyers are often disqualified because they misunderstand previous home ownership provisions, miss filing deadlines, or fail to maintain the necessary records to support their claims,” explains Achen.
Other programs to reduce initial costs
Although not technically tax credits, these programs can significantly reduce the cost of purchasing your first home.
FHA loans with low down payment requirements VA loans for eligible military and veterans USDA loans for eligible rural properties First-generation homebuyer assistance programs in some areas
Lower upfront costs make homeownership more accessible and improve overall financial flexibility.
How to maximize your savings
If you’re planning to buy your first home in 2026, consider the following steps.
Please check your tax situation with a CPA or tax professional before purchasing. Ask your lender about mortgage credit certificates and community assistance programs. Research your state or city’s housing programs early, as some may require pre-approval or a homebuyer education course. Compare the long-term tax benefits of owning to the cost of renting in your area.
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