Tax Alert

2015 Kansas Tax Changes Summary; Kansans’ Tax Burden Increases

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June 16, 2015

Kansas’ lawmakers enacted broad tax law changes to balance the state’s budget in their historic 113-day session, with the bulk of the revenue increase generated by a rise in the state’s sales tax rate. Here’s a recap of the changes Kansas lawmakers approved to fill the state’s $400 million budget shortfall.

State sales tax rate increased from 6.15% to 6.5%:

The statewide sales tax rate increases from 6.15 percent to 6.50 percent starting July 1, 2015.

Eliminate most itemized deductions, reduce deductions for mortgage interest and property taxes

With the exception of charitable contributions, mortgage interest, and property taxes paid, all Kansas itemized deductions would be repealed (retroactive to Jan. 1, 2015). The current changes in the percentage that could be deducted (“haircuts”) being phased in for mortgage interest and property taxes paid relative to the amount that otherwise is allowed for federal income tax purposes would be accelerated such that the final 50 percent haircut currently scheduled for tax year 2017 would be effective immediately. Charitable contributions would remain fully deductible for Kansas taxpayers able to itemize at the state level, as under current law.

On and after Jan. 1, 2015, the Kansas itemized deductions of an individual consist of: (A) 100% of contributions that qualify as charitable contributions allowable as deductions in section 170 of the Federal Internal Revenue Code; (B) 50% of the amount of qualified residence interest as provided in section 163(h) of the Federal Internal Revenue Code; and (C) 50% of the amount of taxes on real and personal property as provided in section 164(a) of the Federal Internal Revenue Code.

Amnesty on interest and penalties

The bill would authorize a tax amnesty for penalties and interest relative to certain delinquent taxes if such taxes are paid in full from Sept.1, 2015, to Oct. 15, 2015. The amnesty would apply to privilege, income, estate, cigarette, tobacco products, liquor enforcement, liquor drink, severance, state sales, state use, local sales, and local use taxes. The amnesty would be limited to penalties and interest applied to liabilities associated with tax periods ending on or before Dec. 31, 2013.

Tax guaranteed payments to owners of pass-through entities

The bill would revise an income tax subtraction modification for certain pass-through non-wage business income to require that guaranteed payments from businesses are counted as income in determining Kansas adjusted gross income.

Postpone scheduled decreases in income tax rates on wage earnings

The tax rates for tax year 2018 and all future years would be 4.6 percent for the top tax bracket and 2.6 percent for the bottom tax bracket.

Hold rates at 2.7% in low bracket and 4.6% in upper bracket

Individual income tax rate reductions scheduled for future years would be eliminated. The tax year 2015 rates of 2.7 percent for the bottom tax bracket and 4.6 percent for the top tax bracket would remain the tax rates through tax year 2017.

Require SSN for credits:

The bill would require an individual claiming a tax credit to have a valid Social Security number for the entire taxable year for which the tax credit is claimed. An exception to this requirement would exist for military spouses in the event that the taxpayers are married filing jointly.

Questions? Contact us

To understand how these changes may affect your organization, please contact your AGH tax professional, or AGH senior vice president of tax services Shawn Sullivan using the information below.

Shawn Sullivan

Senior Vice President
Tax Services

Shawn serves as one of two primary leaders in the firm’s large tax group. He has extensive public and private experience in the fields of tax and accounting and works frequently with clients in the manufacturing, wholesale/retail distribution, real estate development and management, construction, and contractor industries. In addition to enhancing business performance to minimize tax consequences, he has experience in mergers and acquisitions and international tax and business structuring.

A certified public accountant, Shawn is a member of the American Institute of Certified Public Accountants, the Kansas Society of Certified Public Accountants (KSCPA) and chairs the KSCPA Committee on Taxation.

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NOTE: Any advice contained in this material is not intended or written to be tax advice, and cannot be relied upon as such, nor can it be used for the purpose of avoiding tax penalties that may be imposed by the IRS or states, or promoting, marketing or recommending to another party any transaction or matter addressed herein.