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Kansas Tax Bill Update

As you may have heard, Kansas legislators voted on June 6, 2017 to override Governor Sam Brownback’s veto of a bill that rolls back or repeals past income tax cuts.

What does this mean to Kansas taxpayers?

The tax legislation that was passed is expected to create $1.2 billion over two years by increasing tax rates on all taxpayers.  It will also end the exemption of certain income from tax for over 330,000 Kansas business owners and farmers. The Kansas tax credit for child care is also reinstated by the bill.

Beginning in the 2017 tax year, the State of Kansas will again utilize a three-bracket income tax system, with rates set to increase further in 2018.

Here are a few simple examples to illustrate the impact of this legislation:

Example 1:

Married couple, John and Susan had 2016 Kansas Adjusted Gross Income composed primarily of $150,000 in W-2 income and $100,000 in income from a family business.  Under 2016 Kansas tax rules, John and Susan would expect a Kansas tax liability of approximately $5,800. However, under the new rules, they could expect to pay approximately $11,600 in 2017 and $12,650 in 2018 at their 2016 level of income.

Example 2:

Assume the same circumstances as in Example 1, except that John and Susan receive all of their income from the family business. Their Kansas Adjusted Gross income is composed of $250,000 in income from the family business.  Under 2016 Kansas tax rules, John and Susan would expect a Kansas tax liability of $0. However, under the new legislation, they could expect to pay $11,600 in 2017 and $12,650 in 2018 if their income remains at 2016 levels.

Example 3:

Finally, assume that John and Susan do not have any pass-through income from a family business. Their Kansas Adjusted Gross income is composed of $250,000 in W-2 income. Under 2016 Kansas tax rules, John and Susan would expect a Kansas tax liability of $10,400. However, they can now expect to pay the same $11,600 in 2017 and $12,650 in 2018 as in the other examples if their income remains at 2016 levels.

If you have specific questions about how this recent change could impact your tax obligations, please contact us.