‘‘(2) LIMITATION BASED ON AREA MEDIAN IN-
COME.— 
‘‘(A) IN GENERAL.—No credit shall be al-
lowed under subsection (a) to a taxpayer with 
a modified adjusted gross income that is great-
er than the applicable amount. 
‘‘(B) MODIFIED
ADJUSTED
GROSS
IN-
COME.—For purposes of subparagraph (A), the 
term ‘modified adjusted gross income’ means 
the adjusted gross income of the taxpayer for 
the taxable year increased by any amount ex-
cluded from gross income under section 911, 
931, or 933. 
‘‘(C) APPLICABLE AMOUNT.— 
‘‘(i) IN
GENERAL.—For purposes of 
subparagraph (A), the term ‘applicable 
amount’ means an amount that is equal to 
160 percent of the Area Median Income 
set by the Secretary of Housing and Urban 
Development with respect to— 
‘‘(I) the area in which the prin-
cipal residence is located, 
‘‘(II) the size of the household of 
the taxpayer, and 
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‘‘(III) the calendar year in which 
the principal residence is purchased. 
‘‘(ii) REGULATIONS AND GUIDANCE.— 
The Secretary, after consultation with the 
Secretary of Housing and Urban Develop-
ment, shall promulgate such regulations 
and guidance as are necessary to carry out 
the purposes of this subparagraph. 
‘‘(3) LIMITATION BASED ON AREA MEDIAN PUR-
CHASE PRICE.— 
‘‘(A) IN GENERAL.—The amount allowable 
as a credit under subsection (a) (determined 
without regard to this paragraph) shall be re-
duced (but not below zero) by the amount 
which bears the same ratio to the amount which 
is so allowable as— 
‘‘(i) the excess (if any) of— 
‘‘(I) the purchase price of the 
primary residence, over 
‘‘(II) the amount which is equal 
to 110 percent of the area median 
purchase price, bears to 
‘‘(ii) the amount which is equal to 125 
percent of the area median purchase price. 
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‘‘(B) AREA MEDIAN PURCHASE PRICE.— 
For purposes of this paragraph, the term ‘area 
median purchase price’ means the average pur-
chase price for a home in both the area and the 
calendar year in which the purchase of the pri-
mary residence takes place. 
‘‘(C) REGULATIONS AND GUIDANCE.—The 
Secretary, after consultation with the Secretary 
of Housing and Urban Development, shall pro-
mulgate such regulations and guidance as are 
necessary to carry out the purposes of this sub-
paragraph, including setting purchase price lim-
itations for the credit under subsection (a) 
based on area median income. 
‘‘(4) INFLATION ADJUSTMENT.—In the case of 
any taxable year beginning in a calendar year after 
2021, each of the dollar amounts in paragraph (1) 
shall be increased by an amount equal to— 
‘‘(A) such dollar amount, multiplied by 
‘‘(B) the cost-of-living adjustment deter-
mined under section 1(f)(3) for the calendar 
year in which the taxable year begins, deter-
mined by substituting ‘calendar year 2020’ for 
‘calendar year 2016’ in subparagraph (A)(ii) 
thereof. 
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Any increase determined under the preceding sen-
tence shall be rounded to the nearest multiple of 
$100. 
‘‘(5) AGE LIMITATION.—No credit shall be al-
lowed under subsection (a) with respect to the pur-
chase of any residence unless the taxpayer has at-
tained age 18 as of the date of such purchase. In 
the case of any taxpayer who is married (within the 
meaning of section 7703), the taxpayer shall be 
treated as meeting the age requirement of the pre-
ceding sentence if the taxpayer or the taxpayer’s 
spouse meets such age requirement. 
‘‘(c) DEFINITIONS.—For purposes of this section— 
‘‘(1) 
FIRST-TIME
HOMEBUYER.—The 
term 
‘first-time homebuyer’ means any individual if such 
individual 
(and 
if 
married, 
such 
individual’s 
spouse)— 
‘‘(A) has no present ownership interest in 
any residence during the 3–year period ending 
on the date of the purchase of the principal res-
idence to which this section applies, and 
‘‘(B) has not taken the credit in any other 
taxable year. 
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‘‘(2) PRINCIPAL RESIDENCE.—The term ‘prin-
cipal residence’ has the same meaning as when used 
in section 121. 
‘‘(3) PURCHASE.— 
‘‘(A) IN GENERAL.—The term ‘purchase’ 
means any acquisition, but only if— 
‘‘(i) the property is not acquired from 
a person related to the person acquiring 
such property (or, if married, such individ-
ual’s spouse), and 
‘‘(ii) the basis of the property in the 
hands of the person acquiring such prop-
erty is not determined— 
‘‘(I) in whole or in part by ref-
erence to the adjusted basis of such 
property in the hands of the person 
from whom acquired, or 
‘‘(II) under section 1014(a) (re-
lating to property acquired from a de-
cedent). 
‘‘(B) CONSTRUCTION.—A residence which 
is constructed by the taxpayer shall be treated 
as purchased by the taxpayer on the date the 
taxpayer first occupies such residence. 
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‘‘(4) PURCHASE
PRICE.—The term ‘purchase 
price’ means the adjusted basis of the principal resi-
dence on the date such residence is purchased. 
‘‘(5) RELATED
PERSONS.—A person shall be 
treated as related to another person if the relation-
ship between such persons would result in the dis-
allowance of losses under section 267 or 707(b). 
‘‘(d) EXCEPTIONS.—No credit under subsection (a) 
shall be allowed to any taxpayer for any taxable year with 
respect to the purchase of a residence if— 
‘‘(1) the taxpayer disposes of such residence (or 
such residence ceases to be the principal residence of 
the taxpayer (and, if married, the taxpayer’s 
spouse)) before the close of such taxable year, 
‘‘(2) a deduction under section 151 with respect 
to such taxpayer is allowable to another taxpayer for 
such taxable year, or 
‘‘(3) the taxpayer fails to attach to the return 
of tax for such taxable year a properly executed copy 
of the settlement statement used to complete such 
purchase. 
‘‘(e) REPORTING.—If the Secretary requires informa-
tion reporting under section 6045 by a person described 
in subsection (e)(2) thereof to verify the eligibility of tax-
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amount of gain (if any) on such sale. Solely for pur-
poses of the preceding sentence, the adjusted basis 
of such residence shall be reduced by the amount of 
the credit allowed under subsection (a). 
‘‘(4) EXCEPTIONS.— 
‘‘(A) DEATH OF A TAXPAYER.—Paragraph 
(1) shall not apply to any taxable year ending 
after the date of the taxpayer’s death. 
‘‘(B) INVOLUNTARY
CONVERSION.—Para-
graph (1) shall not apply in the case of a resi-
dence which is compulsorily or involuntarily 
converted (within the meaning of section 
1033(a)) if the taxpayer acquires a new prin-
cipal residence during the 2-year period begin-
ning on the date of the disposition or cessation 
referred to in paragraph (1). Paragraph (1) 
shall apply to such new principal residence dur-
ing the recapture period in the same manner as 
if such new principal residence were the con-
verted residence. 
‘‘(C) TRANSFERS BETWEEN SPOUSES OR 
INCIDENT TO DIVORCE.—In the case of a trans-
fer of a residence to which section 1041(a) ap-
plies— 
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‘‘(i) paragraph (1) shall not apply to 
such transfer, and 
‘‘(ii) in the case of taxable years end-
ing after such transfer, paragraph (1) shall 
apply to the transferee in the same manner 
as if such transferee were the transferor 
(and shall not apply to the transferor). 
‘‘(D) SPECIAL
RULE
FOR
MEMBERS
OF 
THE ARMED FORCES, ETC.— 
‘‘(i) IN GENERAL.—In the case of the 
disposition of a principal residence by an 
individual (or a cessation referred to in 
paragraph (1)) after December 31, 2019, 
in connection with Government orders re-
ceived by such individual, or such individ-
ual’s spouse, for qualified official extended 
duty service, paragraph (1) and subsection 
(d)(2) shall not apply to such disposition 
(or cessation). 
‘‘(ii) QUALIFIED OFFICIAL EXTENDED 
DUTY SERVICE.—For purposes of this sec-
tion, the term ‘qualified official extended 
duty service’ means service on qualified of-
ficial extended duty as— 
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‘‘(I) a member of the uniformed 
services, 
‘‘(II) a member of the Foreign 
Service of the United States, or 
‘‘(III) an employee of the intel-
ligence community. 
‘‘(iii) DEFINITIONS.—Any term used 
in this subparagraph which is also used in 
paragraph (9) of section 121(d) shall have 
the same meaning as when used in such 
paragraph. 
‘‘(E) DISPOSITION OF RESIDENCE IN CON-
NECTION WITH CHANGE OF EMPLOYMENT.—In 
the case of the disposition of a principal resi-
dence by an individual (or a cessation referred 
to in paragraph (1)) after December 31, 2019 
in connection with a change of employment 
which meets the conditions described in section 
217(c), paragraph (1) shall not apply to such 
disposition (or cessation). 
‘‘(5) JOINT RETURNS.—In the case of a credit 
allowed under subsection (a) with respect to a joint 
return, half of such credit shall be treated as having 
been allowed to each individual filing such return for 
purposes of this subsection. 
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‘‘(6) RETURN REQUIREMENT.—If the tax im-
posed by this chapter for the taxable year is in-
creased under this subsection, the taxpayer shall, 
notwithstanding section 6012, be required to file a 
return with respect to the taxes imposed under this 
subtitle. 
‘‘(7) RECAPTURE
PERIOD.—For purposes of 
this subsection, the term ‘recapture period’ means 
the 4 taxable years beginning with the taxable year 
in which the purchase of the principal residence for 
which a credit is allowed under subsection (a) was 
made. 
‘‘(g) ELECTION TO TREAT PURCHASE
IN PRIOR 
YEAR.—In the case of a purchase of a principal residence 
after December 31, 2020, a taxpayer may elect to treat 
such purchase as made on December 31 of the calendar 
year preceding such purchase for purposes of this section 
(other than subsections (b)(4), (c), and (h)). 
‘‘(h) APPLICATION OF SECTION.—This section shall 
only apply to a principal residence purchased by the tax-
payer on or after December 31, 2020.’’. 
(b) CERTAIN ERRORS WITH RESPECT TO FIRST- 
TIME HOMEBUYER TAX CREDIT TREATED AS MATHE-
MATICAL OR CLERICAL ERRORS.—Paragraph (2) of sec-
tion 6213(g) of the Internal Revenue Code of 1986 is 
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amended by striking ‘‘and’’ at the end of subparagraph 
(P), by striking the period at the end of subparagraph (Q) 
and inserting ‘‘, and’’, and by inserting after subpara-
graph (Q) the following new subparagraph: 
‘‘(R) an entry on a return claiming the 
credit under section 36 if— 
‘‘(i) the Secretary obtains information 
from the person issuing the TIN of the 
taxpayer that indicates that the taxpayer 
does not meet the age requirement of sec-
tion 36(b)(4), 
‘‘(ii) information provided to the Sec-
retary by the taxpayer on an income tax 
return for at least one of the 2 preceding 
taxable years is inconsistent with eligibility 
for such credit, or 
‘‘(iii) the taxpayer fails to attach to 
the return the form described in section 
36(d)(3).’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply with respect to taxable years begin-
ning after December 31, 2020. 
Æ 
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