The bill adds a new Section 25G to the Internal Revenue Code to provide a tax credit for “qualified multigenerational housing expenses” — defined as costs that improve safety, mobility, or accessibility in a taxpayer’s principal residence to support an eligible relative who lives with the taxpayer. The statutory maximum credit is $8,000 per taxpayer per year, subject to an income phaseout and partial refundability.
This is a targeted federal subsidy for home retrofits that support aging-in-place and multigenerational households. It changes tax treatment in three concrete ways: creates a novel credit category for home accessibility, makes half of the credit refundable, and requires basis reductions and denial of other tax benefits for the same expenses.
The net result will affect homeowners, family caregivers, home‑mod contractors, and tax administration practices at the IRS.
At a Glance
What It Does
Creates an annual credit equal to qualifying accessibility and safety expenses paid to retrofit a taxpayer’s principal residence for a qualifying cohabiting relative, capped at $8,000 and phased out for higher‑income taxpayers. Fifty percent of the allowable credit is treated as refundable.
Who It Affects
Owner-occupants who house an eligible relative (age 65+ or disabled) more than half the year; vendors who perform home accessibility work; preparers and the IRS for compliance and verification; and programs concerned with long‑term care and housing policy.
Why It Matters
It uses the tax code to subsidize home modifications that may reduce institutional long-term care demand and bolster multigenerational living arrangements, while creating new compliance and revenue implications through refundability and basis adjustments.
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What This Bill Actually Does
The bill inserts a new tax credit (IRC §25G) that lets a taxpayer claim expenses paid to make their principal residence safer or more accessible for a co-resident relative who is either age 65 or older or disabled under the cross‑reference to the disability definition in section 72(m)(7). ‘‘Qualified multigenerational housing expenses’’ is intentionally broad in the statute — phrased as costs “directly related to improving the safety, mobility, or accessibility” of the home — but the Secretary of the Treasury is given authority to issue regulations to define the scope and documentation required.
The statutory cap is $8,000 per taxpayer per taxable year. That cap is indexed for inflation beginning with taxable years after 2027.
The credit phases down for taxpayers above specified modified adjusted gross income (MAGI) thresholds: $200,000 for single filers and $400,000 for joint filers, with a reduction of $50 for each $1,000 (or fraction) over the threshold. The bill specifies MAGI by adding back certain exclusions (sections 911, 931, 933) so that excluded foreign‑source income counts toward the phaseout calculation.Mechanically, the statute treats half of the credit as a refundable benefit (it converts 50% of the computed credit into a refundable subpart C credit), while the remainder functions like a nonrefundable credit against tax liability.
To prevent double dipping, the bill bars other tax credits or deductions for the same expenses to the extent of the credit and requires taxpayers to reduce the basis of property by the amount of the credit. That basis reduction means homeowners will have smaller capital‑gains basis for later sales when they claimed this credit.The bill also includes quick conforming amendments to tax administration provisions and an effective date tying applicability to taxable years beginning after December 31, 2026.
Because the statutory language leaves key definitional and procedural issues to Treasury guidance, many practical details — what specific types of work qualify, what documentation will suffice to show co‑residency and disability, and how the IRS will audit or administer refundable claims — will be established through regulations and could materially affect how the credit functions in practice.
The Five Things You Need to Know
The credit is limited to $8,000 per taxpayer per taxable year, with that dollar cap indexed for inflation beginning in taxable years after 2027.
The credit phases out by $50 for each $1,000 (or fraction) of modified adjusted gross income above $200,000 for single filers and $400,000 for joint filers; MAGI adds back exclusions under sections 911, 931, and 933.
A ‘‘qualified relative’’ must either be age 65 by year-end or meet the statutory disability definition (cross-referencing section 72(m)(7)) and must share the taxpayer’s principal residence for more than half the year.
Fifty percent of the credit (after limits and reductions) is treated as a refundable credit under subpart C of the Code; the other half is nonrefundable.
The bill disallows other tax deductions or credits for amounts that generated this credit and requires a dollar-for-dollar reduction in the taxpayer’s basis in qualifying property by the credit amount.
Section-by-Section Breakdown
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Short title
Declares the Act’s short title as the ‘‘Multigenerational Family Tax Credit Act of 2026.’
Credit allowed for qualified expenses
Establishes the new nonrefundable credit category for ‘‘qualified multigenerational housing expenses’’ and allows the credit against tax for the taxable year equal to the aggregate amount of those expenses, subject to the other statutory caps and rules in the following subsections.
Dollar cap and income phaseout
Sets a nominal per-taxpayer cap of $8,000 and prescribes an income-based phaseout: reduce the credit by $50 for each $1,000 (or fraction thereof) of modified AGI over $200,000 ($400,000 joint). It defines modified AGI to include certain excluded foreign income for phaseout purposes. This is the principal targeting mechanism to limit benefits to higher-income households.
Definitions: qualified expenses, qualified relative, principal residence
Defines ‘‘qualified multigenerational housing expenses’’ as expenses directly related to improving safety, mobility, or accessibility of the taxpayer’s principal residence for supporting a qualified relative. A ‘‘qualified relative’’ must meet relationship tests (many relationships in section 152(d)(2)), be age 65 or disabled, and cohabit with the taxpayer for more than half the year. Principal residence is tied to the existing section 121 meaning; however, the statutory text leaves fine‑grained scope (for example, which retrofit items qualify) to Treasury guidance.
Refundability and denial of double benefits
Treats 50% of the allowable credit as a refundable credit (subpart C treatment) while the remainder is applied as a standard nonrefundable credit. It also denies other deductions or credits for the same expenses to the extent of the credit and mandates reduction of the property’s tax basis by the credit amount — a forward‑looking rule that will reduce future depreciation or capital gain basis.
Inflation adjustment and Treasury rulemaking
Provides for inflation indexing of the $8,000 cap starting after 2027, rounded to the nearest $100, and instructs the Secretary to issue regulations or guidance necessary to implement definitions, documentation, and administration.
Conforming amendments and effective date
Makes conforming edits to administrative cross-references in Title 31 and the Code’s deficiency rules, inserts the new section into the table of sections, and sets the effective date for taxable years beginning after December 31, 2026.
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Explore Housing in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Co-resident older adults and people with disabilities: They gain better access to home modifications when family members claim the credit, reducing mobility and safety barriers that can limit independence.
- Multigenerational households and family caregivers: Families that retrofit homes to accommodate aging or disabled relatives will offset part of retrofit costs, lowering out-of-pocket spending for accessibility upgrades.
- Home modification and accessibility contractors: Demand for ramps, lifts, bathroom/grab bar work, doorway widening, and similar services is likely to rise for contractors who specialize in accessibility retrofits.
- Taxpayers with modest tax liabilities: Because 50% of the credit is refundable, lower-income taxpayers who otherwise have limited tax liability can realize cash benefits for qualifying expenses.
Who Bears the Cost
- Federal Treasury / taxpayers at large: The refundable component and absence of tight targeting imply a measurable revenue cost; the bill does not offset revenue with other changes.
- Homeowners who claimed the credit later selling the property: Required basis reductions lower future basis, potentially increasing taxable capital gains when the property is sold.
- IRS and taxpayers (administrative burden): The IRS must design verification procedures, and taxpayers must retain documentation proving qualified expenses, co-residency, and eligibility — a compliance cost for both sides.
- State programs and benefit administrators: Interaction with Medicaid, state home‑repair grants, or other assistance programs could cause coordination or clawback questions, and states may see shifted demand for institutional vs. home care.
Key Issues
The Core Tension
The bill balances two attractive objectives — subsidizing home modifications that allow aging relatives to remain in family homes, and limiting federal cost through caps and phaseouts — against hard trade-offs: tighter targeting reduces cost but raises complexity and administrative burden, while broader refundability increases take‑up and fiscal impact but creates harder verification problems and potential for overlap with other programs. There is no simple way to maximize both uptake among those with real needs and clean, low-cost administration.
The statute intentionally leaves granular qualification and documentation rules to Treasury regulations, which means the practical reach of the credit will depend heavily on how ‘‘safety, mobility, or accessibility’’ is defined, whether certain items (e.g., structural work versus movable equipment) qualify, and what evidence satisfies co‑residency and disability requirements. Those regulatory choices will also shape fraud‑risk and audit costs.
The refundability design (50%) widens access but increases fiscal exposure and invites claims that may be difficult to verify without clear standards for qualifying invoices and certifications.
The required basis reduction introduces a distributional twist: taxpayers receive immediate tax relief when they retrofit but incur higher taxable gain on later disposition. That trade‑off could deter some homeowners from taking the credit if they anticipate selling for a gain.
The bill’s phaseout formula and MAGI definition (adding back certain excluded foreign income) create precise thresholds that produce gradual reductions but still depend on tax filing status and income reporting conventions. Finally, the statute does not resolve interactions with the medical expense deduction, state tax treatments, or means-tested benefit calculations — all of which can produce unintended winners and losers depending on administrative choices and taxpayer circumstances.
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