written by Susan Perrin

On June 7, 2017, the Kansas Legislature overrode the governor’s veto of a bill that reversed many of the Kansas tax reductions put in place in 2013. This means that many of the lower Kansas tax rates and exemptions have or will expire. Below is a summary of some of the law changes that may impact you.

  1. Elimination of the exemption for “non-wage” business income such as Sch C, rental income, farm, trust, partnership and S Corp pass-through income.
    • S Corps that did not include a KS tax distribution in their 2017 tax distribution computations would need to add a Ks component to their tax distributions. May be able to postpone that KS distribution until 2018 as no penalties would be imposed if such taxes are paid on or before April 17, 2018. Thus, this 2017 KS distribution could be included in the 2017 tax “true-up” distribution in 2018.
  2. The federal loss carry forward has been reinstated. May or may not apply to the KS Privilege Tax NOL carry forward. If NOL is back for KS Privilege purposes, it’s not clear if that includes NOLS from all prior years or only pre-2013 years. If the KS Privilege Tax NOL carry forward has been reinstated, could reduce KS privilege tax payments needed for the 2017 calendar year. Could also increase a deferred state tax asset. More on this later.
  3. Individual income tax rates increase, from a top rate of 4.6% in 2016, to 5.2% in 2017 and 5.8% in 2018 but 2017 additional taxes may not need to be paid in until April 17, 2018.
  4. Itemized deductions will be increased over the next few years.
    • Qualified Residence Interest goes from 50% in 2016 to 75% in 2019 to 100% in 2020.
    • Real Estate and Personal Property taxes go from 50% in 2016 to 75% in 2019 to 100% in 2020.
    • Medical expenses (deductible for federal purposes) go from 0% in 2016 to 50% in 2018 to 75% in 2019 to 100% in 2020.

If you have any questions about these changes in Kansas, please contact Susan Perrin at 913-671-8600.