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

This section establishes a nonrefundable first-time homebuyer tax credit under new IRC §36 equal to a taxpayer's down payment (up to $50,000) on a principal residence in the United States acquired during the taxable year. The credit phases out ratably for taxpayers with modified adjusted gross income (from the prior taxable year) exceeding $150,000 ($225,000 for heads of household; $300,000 for joint returns or surviving spouses), with full phaseout at $250,000 ($325,000; $400,000); no credit is allowed to nonresident aliens, taxpayers who dispose of the residence before year-end or who are claimed as dependents, or those failing to attach the settlement statement. Taxpayers may elect an advance payment of the credit to a qualifying escrow account administered by a bank for use solely as a down payment (with unused amounts returned to the IRS within 180 days). The full credit is recaptured (increasing tax liability) if a recapture event—sale, lease to a third party, disposition, or cessation as principal residence—occurs within five years of purchase. Recapture does not apply to purchases of a new principal residence using sale proceeds (with the holding period measured from the original purchase); deaths; transfers incident to divorce; or events due to government-ordered qualified official extended duty service.

This section establishes a new general business tax credit (IRC §45U) equal to 15% of qualified home construction costs (i.e., labor and materials) for constructing and placing in service starter homes of no more than 1,200 square feet with a sale price no greater than 80% of the area median home price (increased to 30% if sold to a first-time homebuyer, as defined in IRC §36(g)(1)). Credits are limited to amounts allocated by state housing credit agencies (as defined in IRC §42(h)(8)(A)), with each state's annual ceiling equal to its unused low-income housing tax credit ceiling from the prior year plus $30 multiplied by state population (per IRC §146(j) and adjusted for inflation after 2025 using 2023 as the base year). The provision includes a basis reduction for the underlying property and applies to taxable years beginning after enactment.