Can I deduct contributions to a Kansas first-time home buyer savings account?

Plain-English summary

Kansas Notice 24-04 explains a change 2024 Senate Bill 360 (Section 2) made to the Kansas income tax subtraction for contributions to a first-time home buyer savings account, found in K.S.A. 79-32,117(c)(xxviii).

For tax years beginning after December 31, 2021, a taxpayer may subtract from Kansas income:

• contributions to a first-time home buyer savings account under K.S.A. 2023 Supp. 58-4903, up to $3,000 for an individual or $6,000 for a married couple filing jointly; or
• amounts received as income earned from the assets in the account.

What changed. Before, a contribution could be subtracted only for the year it was made. For tax years beginning after December 31, 2022, a taxpayer may elect to apply a contribution made on or after January 1 but before the following year's return filing date to the prior tax year, if the election is made when filing. The filing date for this purpose is April 15, and extensions of time to file are not recognized. No contribution may be used as a subtraction in more than one tax year.

Recapture. K.S.A. 79-32,117(b)(xxviii) requires an addition modification for contributions to, or earnings from, the account if distributions were not used to pay authorized expenses or the funds were not held for the minimum time required by K.S.A. 58-4904. This includes amounts resulting from failing to properly identify a surviving payable-on-death beneficiary.

What this means for you

First-time home buyers saving for a purchase

• You can subtract up to $3,000 ($6,000 married filing jointly) of what you contribute each year, plus income earned in the account, from your Kansas income.
• For 2023 and later returns, you can elect to count an early-following-year contribution (made before your April 15 filing date) on the prior year's return. Make the election when you file; extensions do not extend this window.
• Use the money for authorized expenses and hold it for the required time. If you don't, the amount is added back to your Kansas income (recapture) under K.S.A. 58-4904 -- including if you fail to properly name a surviving payable-on-death beneficiary.
• A contribution can be counted in only one tax year.

Common questions

How much can I subtract? Up to $3,000 for an individual or $6,000 for married filing jointly each year, plus income earned in the account.

Can I count an early-following-year contribution on last year's return? Yes, for tax years beginning after December 31, 2022, by electing at filing to apply a January 1-to-April 15 contribution to the prior year. Extensions are not recognized.

What triggers recapture? Using distributions for unauthorized expenses, not holding funds for the minimum time under K.S.A. 58-4904, or failing to properly identify a surviving payable-on-death beneficiary.

Can I use a contribution in more than one year? No.

Citations and references

• Senate Bill 360 (2024) -- Section 2 expanded the first-time home buyer savings account subtraction to allow the prior-year election.
• K.S.A. 79-32,117 -- Kansas addition and subtraction modifications; subsection (c)(xxviii) is the first-time home buyer savings account subtraction.
• K.S.A. 79-32,117(b)(xxviii) -- addition modification (recapture) for unauthorized distributions.
• K.S.A. 58-4903 -- establishes the first-time home buyer savings account.
• K.S.A. 58-4904 -- authorized expenses and minimum holding requirements.
• K.S.A. 79-3221 -- the income tax return filing date referenced for the prior-year election.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 24-04

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                        NOTICE 24-04

           CONTRIBUTIONS TO FIRST-TIME HOME BUYER SAVINGS ACCOUNTS

                                        (JUNE 5, 2024)

   During the 2024 Legislative Session Senate Bill 360 was passed and signed into law. Section

2 of the Bill amended K.S.A. 79-32,117, to make changes to the income tax modifications for
contributions to first-time home buyer savings accounts.

   In accordance with K.S.A. 79-32,117, certain addition and subtraction modifications are

made to a taxpayer's federal adjusted gross income to determine the taxpayer's Kansas adjusted
gross income. Subsection (c)(xxviii) permits a subtraction modification for certain contributions
to a first-time home buyer savings account or for amounts received as income earned from the
account. The annual contribution amount is capped at $3,000 for an individual, and at $6,000 for
a married couple filing jointly.

  Prior to amendment, the amount of the contribution could be claimed as a subtraction

modification only for the tax year in which the contribution was made. The amended language
expands this period for all tax years beginning after December 31, 2022. The subsection, with the
newly added language, provides:

         (c)(xxviii) For all taxable years beginning after December 31, 2021: (1) The
   amount contributed to a first-time home buyer savings account pursuant to K.S.A. 2023
   Supp. 58-4903, and amendments thereto, in an amount not to exceed $3,000 for an
   individual or $6,000 for a married couple filing a joint return; or (2) amounts received
   as income earned from assets in a first-time home buyer savings account. For all
   taxable years beginning after December 31, 2022, contributions made to a first-time
   home buyer savings account pursuant to subparagraph (1) on and after January 1 but
   prior to the date required for filing a return pursuant to K.S.A. 79-3221, and
   amendments thereto, of the successive taxable year may be elected by the taxpayer to
   apply to the prior taxable year if such election is made at the time of filing the return.
   No contribution shall be used as a modification pursuant to subparagraph (1) in more
   than one taxable year.

    In accordance with prior law, taxpayers who contributed to a first-time home buyer savings

account during tax year 2023 may claim a subtraction modification for the contribution on their
2023 Kansas income tax return. In accordance with the new language, a taxpayer who contributed
to a first-time home buyer savings account during tax year 2024, but prior to the date required for
filing their tax year 2023 return, may claim a subtraction modification for the contribution on either
their tax year 2023 return or their tax year 2024 return. In subsequent years, taxpayers making
contributions to a first-time home buyer savings account have the option of claiming a subtraction
modification for the contribution in either: (1) the tax year of the contribution, or (2) the prior tax

year if the contribution is made prior to the date required for filing their tax return for the prior tax
year. For purposes of these provisions, the date required for filing a tax return is April 15th, and
extensions of time to file are not recognized.

  It should be noted K.S.A 79-32,117(b)(xxviii) requires an addition modification for the

amount of any contributions to, or earnings from, a first-time home buyer savings account if
distributions from the account were not used to pay authorized expenses or were not held for the
minimum length of time established by K.S.A. 58-4904. Contributions to, or earnings from, such
account include amounts resulting from the failure to properly identify a surviving payable on
death beneficiary.

                                   TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                                Taxpayer Assistance Center
                               Kansas Department of Revenue
                               Scott Office Building, 1st Floor
                                      120 SE 10th Ave
                                       P. O. Box 3506
                                  Topeka, KS 66601-3506
                                    Phone: 785-368-8222
                                     Fax: 785-291-3614