Is There a First-Time Home Buyer Tax Credit in 2026? The New Jersey Answer

The short answer

No federal first-time home buyer tax credit exists for the 2026 tax year, and New Jersey does not have one either. The federal credit covered homes bought from 2008 to 2010: up to $7,500 for 2008 purchases, then up to $8,000. Today the IRS keeps Form 5405 only so earlier buyers can repay it. Bills to create a new credit have been introduced in Congress, but none has become law.

A New Jersey buyer who closes in 2026 can still lower their taxes in other ways:

• Federal deductions, if you itemize: mortgage interest, qualifying points, property taxes and, new for 2026, mortgage insurance premiums.
• New Jersey’s return: a property tax deduction of up to $15,000, or a $50 refundable credit.
• Your IRA: up to $10,000 for a first home without the 10% early-withdrawal tax.
• NJHMFA, at closing rather than on your return: up to $15,000 of forgivable down payment assistance, depending on the county.

Why this question comes up every January

Searches for “first time home buyer tax credit” peak in January (Semrush keyword trend for the U.S., read October 26, 2026). That is when Form 1098 and other tax statements arrive and buyers find out what their new home does to their return.

The timing matters for planning. The IRS says its tax year 2026 figures generally apply to returns filed in 2027. Points and property taxes count in the year you pay them, so if you close by December 31, 2026, what you pay at and after closing goes on the 2026 return. If you close in January 2027, it waits for the return you file in 2028.

What happened to the 2008-2010 first-time buyer credit

The IRS’s January 2010 fact sheet, which still appears first in Google for this search, describes a refundable credit of 10 percent of the price, up to $8,000. It was for buyers who had not owned a main home in the three years before the purchase, and it required a binding contract by April 30, 2010 and a closing by June 30, 2010. Members of the armed forces serving abroad had one more year. The same fact sheet says the credit was first capped at $7,500 ($3,750 married filing separately) when it began in 2008; the $8,000 maximum applied to homes bought in 2009 and 2010.

That credit is over. The IRS’s Form 5405 page now describes the form only as a way to report that the home is no longer your main home and to figure the credit you must repay, and it says the form will no longer be revised (January 23, 2026). The 2025 edition of IRS Publication 530, the IRS’s guide for homeowners, lists one home-related credit: the mortgage interest credit for buyers with a mortgage credit certificate.

Proposed credits are not law

You may read about a new first-time buyer credit in the news. Those amounts come from bills, and a bill is not law until it passes both chambers of Congress and is signed.

The bill Google shows for this search is H.R. 3475, the Bipartisan American Homeownership Opportunity Act of 2025. Congress.gov’s summary says it would give first-time buyers a refundable credit equal to their down payment, up to $50,000, phasing out above $150,000 of income for single filers and $300,000 for joint filers. When we read the page on October 26, 2026, its status was “Introduced”: the latest action was its referral to the House Ways and Means Committee on May 17, 2025. We will update this page if any first-time buyer credit becomes law.

What a New Jersey first-time buyer can use for 2026

• Federal first-time homebuyer credit

  Credit

  Not available. It covered purchases from 2008 to 2010 (up to $7,500 in 2008, then up to $8,000); Form 5405 is now only for repaying it.

  IRS, Form 5405

• Proposed credits such as H.R. 3475

  Bill

  Not law. H.R. 3475 was introduced May 17, 2025 and referred to the Ways and Means Committee.

  Congress.gov

• Mortgage interest

  Deduction

  Interest on up to $750,000 of home purchase debt ($375,000 married filing separately) if you itemize.

  IRS, Pub. 936

• Points on your purchase loan

  Deduction

  Often fully deductible the year you pay them, if the IRS tests are met and you itemize.

  IRS, Pub. 530

• Mortgage insurance premiums

  Deduction

  Back for 2026. Shrinks above $100,000 of income and ends above $109,000 ($54,500 married filing separately).

  IRS, draft 2026 Pub. 936

• Property taxes (federal)

  Deduction

  Part of the state and local tax limit: $40,400 for 2026, reduced above $505,000 of income, never below $10,000 ($5,000 married filing separately).

  IRS, 2026 Form 1040-ES correction

• NJ property tax deduction or credit

  NJ deduction or credit

  On your NJ-1040: deduct property taxes up to $15,000, or take a $50 refundable credit. One or the other.

  NJ Division of Taxation

• IRA withdrawal for a first home

  Penalty exception

  Up to $10,000 over your lifetime without the 10% early-withdrawal tax. Income tax can still apply.

  IRS, Pub. 590-B

• NJHMFA down payment assistance

  Assistance (not a tax break)

  Up to $15,000 by county, a five-year forgivable loan paired with an NJHMFA first mortgage.

  NJHMFA

Checked October 26, 2026. A credit lowers your tax dollar for dollar; a deduction lowers the income your tax is figured on.

Mortgage interest and points

IRS Publication 936 lets you deduct interest on up to $750,000 of debt used to buy, build or improve your main or second home ($375,000 if married filing separately), for loans taken out after December 15, 2017. The IRS’s overview of the 2025 tax law says that limit is now permanent. Your lender reports the interest on Form 1098.

Points are prepaid interest. Publication 530 says you can usually deduct them over the life of the loan, or in full in the year you pay them when the loan buys your main home and a list of tests is met. Among them: the points are a percentage of the loan, they appear on your settlement statement, and the cash you brought to closing was at least as much as the points. Points the seller pays for you count as paid by you.

Mortgage insurance is deductible again in 2026

For 2025 returns, Publication 936 says the mortgage insurance deduction has expired. For 2026 it is back: the IRS’s early-release draft of the 2026 Publication 936 says the deduction for qualified mortgage insurance premiums has been reinstated, claimed on line 8d of Schedule A for amounts paid in 2026.

• What counts: private mortgage insurance and the insurance or fees on FHA, VA and USDA loans, for policies issued after 2006 on debt used to buy your home.
• The income limit: the deduction shrinks once adjusted gross income passes $100,000 ($50,000 married filing separately) and is gone above $109,000 ($54,500).
• It is a draft: the IRS says drafts can change before the final publication. Check the final 2026 edition when you file.

If your loan has mortgage insurance and your income is under the limit, look for the premiums on your Form 1098; the draft says to ask the insurer for the amount if the form does not show it.

Property taxes: the federal limit and the NJ-1040 deduction

On your federal return

Property taxes are part of the state and local tax (SALT) deduction, together with your New Jersey income tax. The IRS’s correction to the 2026 Form 1040-ES sets the 2026 limit at $40,400 ($20,200 married filing separately). It is reduced when modified adjusted gross income is over $505,000 ($252,500 married filing separately), but not below $10,000 ($5,000 married filing separately). For 2025 the limit was $40,000.

On your New Jersey return

The NJ Division of Taxation lets homeowners who pay property taxes on their main home in New Jersey deduct the taxes paid or $15,000, whichever is less, or take a refundable $50 credit instead. You can claim only one, and the NJ-1040 instructions show which is worth more. If you own the home with someone who is not your spouse, you claim only your share of the taxes.

The year you buy, Publication 530 treats the seller as paying the property taxes up to the day of the sale and you from that day on, whoever actually paid the bill. Your closing statement shows the split.

Will you itemize? A worked example

None of the federal deductions above helps unless your itemized total beats the standard deduction. The IRS’s 2026 figures:

Source: IRS, IR-2025-103.

Take a married couple who close on a Bergen County home in 2026 and file jointly. These numbers are an illustration, not a quote or a forecast: in their first full year, Form 1098 shows $26,000 of mortgage interest, they pay $11,000 of property taxes, and $7,000 of New Jersey income tax is withheld.

• SALT: $11,000 + $7,000 = $18,000, under the $40,400 limit, so all of it counts.
• Itemized total: $26,000 + $18,000 = $44,000.
• Compared with the standard deduction: $44,000 − $32,200 = $11,800 more deducted by itemizing.

What $11,800 saves depends on their tax bracket. If the same couple had $15,000 of interest and $9,000 of property taxes, plus the same $7,000 of state income tax, their $31,000 total would fall short of $32,200, and buying would not change their federal tax. That is why “do you get a bigger refund if you buy a house” has no single answer. A tax professional can run your own numbers.

The one federal credit: a Mortgage Credit Certificate

The IRS’s Topic 505 says you may be able to take a credit for part of your mortgage interest if a state or local government agency issued you a mortgage credit certificate (MCC). You figure it on Form 8396. If you later sell, part of the benefit from an MCC or from a loan funded by tax-exempt mortgage bonds can be recaptured, as Publication 523 explains.

In New Jersey, the state housing agency’s homebuyer programs page lists down payment assistance and four first mortgage programs, and no MCC program, as of October 26, 2026. If someone offers you an MCC, ask which agency issues it and get the certificate in writing before you count on the credit.

Using your IRA for a first home

IRS Publication 590-B lets you take up to $10,000 from an IRA to buy, build or rebuild a first home without the 10% additional tax, even if you are under 59½. The rules:

• First-time buyer means no main home for two years. You, and your spouse if you are married, had no ownership in a main home in the two years before the purchase contract.
• $10,000 is a lifetime limit per person. If both spouses qualify, each can take $10,000.
• Use it within 120 days. The money has to pay for the purchase or closing costs within 120 days of the withdrawal.
• IRAs only. The IRS’s exceptions table applies the first-home exception to IRAs, not to 401(k) and other workplace plans.

The exception removes the extra 10% tax, not income tax: the IRS says most retirement distributions are still subject to income tax.

New Jersey help that is not a tax credit

New Jersey’s first-time buyer help comes before you file, at closing. The New Jersey Housing and Mortgage Finance Agency’s fact sheet (updated June 17, 2026) and homebuyer page say:

• Down payment assistance of $15,000 in Bergen, Essex, Hudson, Hunterdon, Mercer, Middlesex, Monmouth, Morris, Ocean, Passaic, Somerset and Union, and $10,000 in Atlantic, Burlington, Camden, Cape May, Cumberland, Gloucester, Salem, Sussex and Warren.
• It is a loan that goes away. No interest and no monthly payment, forgiven after five years if you keep living in the home and do not refinance or sell.
• It needs an NJHMFA first mortgage from a participating lender, with county income and purchase price limits.
• First-generation buyers can add $7,000, for $17,000 to $22,000 in total.

CMG Mortgage Inc., the lender Jimmy works for, is on NJHMFA’s participating lender list updated October 1, 2026. Our guide to the NJHMFA First-Time Homebuyer Mortgage covers the limits and the steps, and the New Jersey first-time buyer guide compares every statewide program.

Home credits that ended with 2025

If you plan upgrades after you move in, two credits you may have heard about are gone. The IRS’s summary of the 2025 tax law says the Energy Efficient Home Improvement Credit is not allowed for property placed in service after December 31, 2025, and the Residential Clean Energy Credit is not allowed for spending after that date.

What to keep for your 2026 return

1. Your Closing Disclosure, which shows points, prepaid interest and the property tax split.
2. Form 1098 from your loan servicer, with interest, points and mortgage insurance premiums.
3. Your property tax bills and payment records for the part of 2026 you owned the home.
4. Form 1099-R if you took money from an IRA for the purchase.
5. Your NJHMFA assistance documents, if you used the program.

For a full picture of what you pay at closing, read our NJ buyer closing costs guide.

Frequently asked questions

Related guides

• First-Time Home Buyer Programs in New Jersey→Every statewide program side by side, with the county down payment assistance amounts.
• NJHMFA First-Time Homebuyer Mortgage→The state agency's first mortgage, its limits, and how the $10,000 or $15,000 assistance pairs with it.
• First-Time Home Buyer Grants in NJ→Grants and forgivable assistance New Jersey buyers can apply for, and who qualifies.
• How Pre-Approval Works→What a lender checks before you make an offer, and what to have ready.

Sources

• IRS, Fact Sheet FS-2010-6, Tax Credits for Home Buyers (January 2010)
• IRS, About Form 5405, Repayment of the First-Time Homebuyer Credit (updated March 30, 2026)
• Congress.gov, H.R. 3475, Bipartisan American Homeownership Opportunity Act of 2025 (status read October 26, 2026)
• IRS, Publication 530 (2025), Tax Information for Homeowners
• IRS, Publication 936 (2025), Home Mortgage Interest Deduction
• IRS, Publication 936 (2026) early-release draft: mortgage insurance premiums reinstated for 2026
• IRS, Topic no. 505, Interest expense (mortgage credit certificates)
• IRS, correction to the 2026 Form 1040-ES: 2026 state and local tax deduction limit
• IRS, tax inflation adjustments for tax year 2026 (IR-2025-103, October 9, 2025)
• IRS, Publication 590-B, Distributions from IRAs: first home
• IRS, Retirement topics: exceptions to tax on early distributions
• IRS, Working Families Tax Cuts provisions: home energy credit expirations
• IRS, Working Families Tax Cuts: individuals and workers (deduction for seniors)
• IRS, Understanding the Working Families Tax Cuts: individual tax provisions (mortgage interest limit made permanent)
• NJ Division of Taxation, Property Tax Deduction/Credit for Homeowners and Tenants (updated March 23, 2026)
• NJHMFA, homebuyer programs
• NJHMFA, First-Time Homebuyer Mortgage Program fact sheet (updated June 17, 2026)
• NJHMFA, Participating Lender List (updated October 1, 2026)

Equal Housing Opportunity. Jimmy Joseph, MBA is a loan officer, NMLS #1577754, with CMG Mortgage, Inc., dba CMG Home Loans, NMLS #1820. This page is general information about tax rules as published by the IRS and the State of New Jersey on October 26, 2026. It is not tax or legal advice, not a commitment to lend, and does not quote rates. Tax law changes; confirm your situation with a tax professional.