H.R. 3475: Bipartisan American Homeownership Opportunity Act of 2025

This bill, known as the Bipartisan American Homeownership Opportunity Act of 2025, proposes changes to the tax code to support first-time homebuyers and incentivize the construction of starter homes. Here’s a breakdown of its main features:

1. First-Time Homebuyer Credit

The bill introduces a new tax credit for first-time homebuyers. Key points include:

• Credit Amount: Eligible first-time homebuyers can receive a tax credit equal to the amount of their down payment, up to a maximum of $50,000.
• Income Limitations: The credit is phased out for individuals with modified adjusted gross incomes (MAGI) above certain thresholds:
  • $300,000 for married couples filing jointly.
  • $225,000 for heads of household.
  • $150,000 for all other filers.
• Eligibility: To qualify as a first-time homebuyer, individuals must not have owned a principal residence for the previous 10 years and must not have received this credit in prior years.
• Exceptions: The credit is not available if the buyer is a nonresident alien, sells the home within the same year, or fails to provide required documentation.
• Advanced Payment Option: Buyers can choose to receive the credit as an advance payment deposited into a qualifying escrow account.
• Recapture of Credit: If the buyer sells the property or it ceases to be their main residence within five years, they may need to repay the credit.

2. Starter Home Construction Credit

The bill also introduces a tax credit aimed at those constructing starter homes. Key features include:

• Credit Rate: Homebuilders can claim a credit of 15% on qualified home construction costs for new housing units. If the unit is sold to a first-time homebuyer, this rate increases to 30%.
• Size Limits: The homes must not exceed 1,200 square feet and must be priced below 80% of the area median home price.
• Allocation of Credits: Each state will be allocated a specific amount of credits based on population and previous unused credits, which housing agencies can distribute.

3. General Provisions

• The bill allows for adjustments based on inflation, ensuring the credit amounts remain relevant over time.
• It sets out requirements for reporting by lenders and mandates the Secretary to issue regulations needed to implement these provisions.
• All changes will take effect for taxable years starting after the law is enacted.

Relevant Companies

• D.R. Horton (DHI): As one of the largest homebuilders in the U.S., this company may see an increase in demand for starter homes due to the new construction credit.
• Lennar Corporation (LEN): Another major homebuilder that may benefit from incentives for first-time homebuyers, potentially leading to more sales of affordable homes.
• Toll Brothers (TOL): Noted for luxury homes, but if they participate in the starter home sector, they could be impacted by both the homebuyer and construction credits.