Bipartisan American Homeownership Opportunity Act of 2025

The Bipartisan American Homeownership Opportunity Act of 2025 creates two new tax-credit tools intended to expand home ownership and spur affordable starter-home construction. First, it adds a new first-time homebuyer credit under Section 36 that allows a credit equal to up to $50,000 of a qualifying down payment for a purchaser of a principal residence, with income-based phaseouts based on the taxpayer’s modified adjusted gross income (MAGI). The credit can be paid upfront via an optional qualifying escrow account (advanced payment) or claimed when filing taxes, and it includes recapture rules if the home ceases to be the principal residence or is otherwise disposed of within five years. The definition of “first-time homebuyer” includes a 10-year lookback showing no prior ownership of a principal residence and no prior use of the credit. Second, the bill creates a Starter Home Construction Credit under new Section 45U. This is a nonrefundable credit equal to 15% of qualified home construction costs, increased to 30% for units sold to a first-time homebuyer. The credit applies to modestly sized units (up to 1,200 square feet) with sale prices not exceeding 80% of the area median home price. The credit is allocated to states through state housing credit agencies, with annual caps that grow based on population and unused prior-year ceilings, and is indexed for inflation after 2025. The Starter Home Credit is folded into the general business credit (Section 38) for business tax purposes. Both credits are effective for taxable years beginning after enactment. Overall, the act aims to boost homeownership by helping with down payments for first-time buyers and by incentivizing the construction of affordable starter homes, while including safeguards, adjustment mechanisms, and coordination with existing tax-credit structures.