Thursday, July 23, 2009

$5,000 New Construction Buyer Tax Credit

On June 26, 2009 as a result of a special legislative session, Governor Beshear signed into law HB3, which contains incentives for new home purchasers. This measure recognizes the importance of putting people back to work in the hard hit construction industry as a means of increasing economic activity and tax revenues. We compliment the Legislature and Governor for their progressive recovery plan. A summary of their plan is below and detailed components of the bill follows

* In effect from July 26, 2009 to July 26, 2010. The new home must close during this period.

* Purchasers of new homes during that period will receive up to $5,000 non-refundable tax credit (non-refundable means that the credit will go against a tax liability to the state. i.e. if your state tax liability is only $4,200 you can only take a tax credit of $4,200, if your state tax liability is $6,2000, you can only take $5,000).

* The new home buyer must live in the home for at least two years or pay back the tax credit to the state.

* There is a total program cap of $25 million (5,000 homes or more depending on size of actual credits). The tax credit is over when that cap is reached or July 26, 2010 whichever comes first.

* Purchases are defined as anyone other than first time home buyers.

* The new home must be the home owner’s principal residence. A new home is defined as either detached or attached and has never been occupied.

* Within seven calendar days after purchase of a qualified residence, the qualified buyer shall submit a completed application for the new home tax credit on forms provided by the Kentucky Department of Revenue.

* The Department of Revenue will create a web site to explain the credit to the public and to keep track of the amount of the program cap dollars remaining.

Watch for additional information as the final regulations are published and check with your tax advisor to conform eligibility and benefits of the program

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