Tax credits and incentives for new homebuyers in 2026
Buying your first home involves important financial decisions, and understanding the tax breaks and incentives available can make a significant difference. Although federal programs have changed over the years, there are still several tax breaks and assistance options that can help lower the cost of homeownership in 2026. at home in Deventer or a house in OrlandoThis real estate guide from Redfin breaks down what first-time buyers need to know about tax credits and incentives available in 2026.
What makes you suitable as a starter on the housing market?
For most programs, you are considered one first home buyer if you have not had your main residence in the past three years. This definition applies to many state and local assistance programs, as well as certain federally supported options.
You can still qualify even if you owned property in the past, as long as you haven’t owned a home recently.
Tax benefits available for starters
Although there will be no active federal tax credit for first-time homebuyers in 2026, homeownership still comes with several tax benefits. Understanding how these deductions and credits work can help you assess potential savings and make a more informed financial decision before you buy anything.
“Potential buyers should inquire what exemptions or concessions the sellers are receiving and get an estimate of what their taxes would be,” said Lisa Miura, property tax administrator at the County of Hawaii. “There are other programs available if the buyer does not plan to live on the property, including agricultural and long-term rentals.”
Mortgage interest deduction
Homeowners who itemize deductions can deduct mortgage interest paid on qualified home loans, subject to IRS limits. This can reduce taxable income, especially in the early years of a mortgage when interest payments are higher.
Real estate tax deduction
You may deduct state and local taxes property taxessubject to current federal limit for state and local tax deductions.
Mortgage credit notes
Some state and local housing finance agencies offer mortgage credit certificates, also called MCCs. This allows eligible buyers to convert a portion of their annual mortgage interest into a dollar-for-dollar federal tax credit, up to a limited amount. This can provide ongoing annual tax savings for qualified homeowners.
“Buyers should contact their state housing finance agency before signing a purchase contract to confirm MCC availability and reserve the certificate,” says Mike Habib, E.A. “If you close without securing it, the federal credit for that home is permanently lost. It’s also important to run the numbers to see if itemizing makes sense and to keep a complete closing file with your MCC Certificate, Closing Disclosure, and Form 1098. Most of the problems I see could have been avoided with a quick conversation before closing rather than after the tax return was filed.”
Incentives for first-time buyers in the state and local markets
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 assistance subsidies
- Forgivable loans
- Second mortgages with low interest rates
- Assistance with closing costs
- State-level tax credits
Eligibility often depends on income limits, purchase price limits and whether the home is located in a certain area.
Because programs vary widely by state and city, buyers should contact their state housing finance agency or local housing department to review available options.
Programs for first-time homebuyers in Canada
“Many first-time buyers assume that all homebuyer programs work the same, but the rules can vary significantly,” says Clayton Achen, CPA and managing partner at Achen Henderson CPAs. “For example, the First Home Savings Account and the Home Buyers’ Plan are often confused, even though FHSA withdrawals can generally be tax-free without refund, while HBP withdrawals from an RRSP generally must be repaid over time. Buyers also often overlook timing requirements and assume that qualifying for one program automatically means qualifying for others.”
“A common problem is that eligibility rules vary from program to program, especially regarding the definition of a first-time home buyer. Income limits, purchase price thresholds, occupancy requirements, and documentation can all impact access to credits, rebates, or incentive programs. In practice, buyers are often disqualified because they misunderstand previous homeownership rules, miss filing deadlines, or fail to maintain the records necessary to make their claim. support,” Achen explains.
Other programs that reduce initial costs
Although not technically tax breaks, these programs can significantly reduce the cost of buying your first home:
- FHA loans with lower down payment requirements
- VA Loans for eligible service members and veterans
- USDA loans for eligible rural properties
- Assistance programs for first-generation homebuyers in some areas
Lower upfront costs can make homeownership more accessible and improve overall financial flexibility.
How to maximize your savings
If you plan to buy your first home in 2026, consider these steps:
- Check your tax situation with a CPA or tax professional before making a purchase.
- Ask lenders about mortgage credit certificates and local assistance programs.
- Investigate state and city housing programs early, as some programs require pre-approval or homebuyer education courses.
- Compare the tax benefits of long-term ownership with the costs of renting in your area.
