As part of the state budget approved by the legislature on May 28th, and House Bill 2 approved by the Governor on June 4th, several changes were made to the KY state tax credit.
As of June 4, 2010, the credit was extended to homes closing before January 1, 2011. The provision against combining the state tax credit with a $6,500 or $8,000 federal homebuying tax credit has been removed for purchasers who closed November 7, 2009 and later, provided they submit a timely application. Homebuyers who closed between November 7, 2009 and June 4, 2010 must fax an application by July 6th. Those closing after June 4, 2010 must submit their applications within 2 weeks of closing.
Previously occupied homes are still disqualified from the tax credit. According to the KY Department of Revenue website, a qualified principal residence "means a single-family dwelling, built to be occupied by a single family. It must be certified by the seller as having never been occupied and must be the principal residence of the qualified buyer for a minimum of two years. It may include a detached house, an attached condominium or townhouse, or a manufactured home, including house trailers and modular homes".
According to the Department of Revenue, $5,197,500 of the $25 million originally allocated for the credit has been used. Mostly due to the implementation of the $6,500 federal tax credit for repeat homebuyers, considerable program funds remained available from the original $25 million allocation. The original $25 million budgeted for this program is now capped at $15 million, leaving $9,802,500 remaining to be used in this credit program at the time of the extension.
You Can Claim the Credit if All of the Following Apply:
- Your qualified principal residence is a single family dwelling;
- Your qualified residence is purchased to be the principal residence of the qualified buyer(s) for a minimum of two (2) years;
- You purchase a new home after July 25, 2009 and before January 1, 2011; and,
- You meet qualifications and receive approval from the Department of Revenue.
You Cannot Claim the Credit if:
- Your new residence has been previously occupied.
- Your application is received after the New Home Tax Credit cap has been reached.
- You are eligible for first time homebuyer credit ($8,000 credit) under Section 36 of the Internal Revenue Code or the amendment to the homebuyer credit signed into law on November 6 as part of the Worker, Homeownership, and Business Assistance Act of 2009 ($6,500 credit) and purchased your home on or before November 6, 2009.
- You are building or contracting construction of your own home. The new home tax credit is only for those taxpayers who purchase a new previously unoccupied single-family dwelling. "Purchase" means a point within the approved times when escrow closes between the qualified buyer and the seller of the qualified principal residence. Homeowners who build newly constructed homes on their own land do not qualify for the credit based on KRS 141.388.
- Your application is not received via FAX within seven (7) calendar days from the purchase date. Any application submitted via mail will be denied. Additionally, taxpayers who closed between the dates of November 7, 2009 and June 4, 2010 and previously were disqualified because they were claiming a federal homebuying tax credit may be approved by faxing an application to the department of revenue by July 6, 2010.
The credit is non-refundable, which means it is used to offset a tax liability to the state of Kentucky, but cannot result in a tax refund if the tax credit exceeds the amount of tax liability. This credit is offered exclusively by the state of Kentucky on a homebuyer's state tax return.
More than 9 million dollars in program funds remained available at the time of the credit deadline extension in June 2010. The funds are available on a first-come, first-served basis until December 31, 2010 or until the funds run out, whichever is first. To view current availability of funds on the Kentucky Department of Revenue website, click here.
The tax credit may be claimed by qualified buyer submitting a completed application via fax within seven calendar days of closing on a new home. However, taxpayers who closed between the dates of November 7, 2009 and June 4, 2010 and previously were disqualified because they were claiming a federal homebuying tax credit must fax an application to the department of revenue by July 6, 2010. The application form is provided by the Kentucky Department of Revenue.
Persons successfully claiming the credit will be provided a form by the Kentucky Department of Revenue that can be used in filing their state tax returns.
Click here to read about the tax credit and how to find forms on the Kentucky Department of Revenue's web site.
To read about the changes to the credit made by House Bill 2, click here.
The information in this article is provided by the Home Builders Association of Kentucky and the KY Department of Revenue's web site. As always, please consult your tax professional for advice on how this tax credit may apply to your specific circumstances.