Kansas Governor Signs Omnibus Tax Legislation Revising Individual Income Tax Rates

By Ashleigh M. Paige

On June 20, 2024, Kansas Governor Laura Kelly signed omnibus tax legislation which modifies income tax rates for individuals, eliminates the income limit to qualify for a subtraction modification for social security income, increases the Kansas standard deduction and personal exemption, and decreases the banking privilege tax rate. The bill also excludes section 1031 transactions as indicators of fair market value (FMV) and increases the extent of the residential property exemption from the statewide school levy. (L. 2024, S1 (1st S.S.), effective from and after publication in the Kansas Register.)

Individual income tax rates.

For tax years 2024 and all tax years thereafter, the individual income tax rates will be as follows:

Married individuals filing jointly: 5.2% of Kansas taxable income up to $46,000 and $2,392 plus 5.58% of the excess over $46,000.

All other individuals: 5.2% of Kansas taxable income up to $23,000 and $1,196 plus 5.58% of the excess over $23,000.

The bill also removes the provision which provides for a tax liability of zero for married taxpayers with taxable income of less than $5,000 and all other individuals with taxable income of less than $2,500.

Standard deduction.

The bill also increases the Kansas standard deduction. For tax year 2024 and all tax years thereafter, the Kansas standard deduction for an individual, including husband and wife who are either both residents or who file a joint return as if both were residents will be as follows:

1. single individual filing status, $3,605;
2. married filing status, $8,240; and
3. head of household filing status, $6,180.

Personal exemption.

For tax year 2024 and all tax years thereafter, the Kansas personal exemption is increased as follows:

1. married individuals filing a joint return, $18,320;
2. all other individuals with a filing status of single, head of household, or married filing separate, $9,160; and
3. in addition to the amount allowed above, a personal exemption of $2,2320 for each dependent for which the taxpayer is entitled to a deduction for the tax year for federal tax purposes.

Social Security income.

For all tax years beginning after December 31, 2023, amounts received as benefits under the federal Social Security Act that are included in federal adjusted gross income of a taxpayer are to be subtracted from federal adjusted gross income, removing the $50,000 limit for the subtraction modification.

Credit for household and dependent care expenses.

The bill expands, for tax years 2024 and all tax years thereafter, the credit for household and dependent care expenses from 25% of the amount of the credit allowed against a taxpayer’s federal income tax liability to 50% of such amount.

Banking privilege tax.

For tax year 2024 and all tax years thereafter, the banking privilege tax on national banking associations and state banks is reduced from 2.25% of net income to 1.94% of net income. The surtax remains at 2.125% of net income in excess of $25,000. The privilege tax on trust companies and savings and loan associations is reduced from 2.25% to 1.93% of net income. The surtax remains at 2.25% of net income in excess of $25,000.

Residential property.

For tax year 2024 and all tax years thereafter, the exemption for residential property from the school district tax is increased from $40,000 of its appraised valuation to $75,000 of its appraised valuation. The bill also removes the provision that adjusts the dollar amount of the exemption based on the valuation of all residential real property for the preceding 10 years.

Fair market value.

The sale price or value at which a property sells or transfers ownership in an IRC § 1031 exchange will not be considered an indicator of FMV nor as a factor in arriving at FMV. IRC § 1031 exchange transactions must not be used as comparable sales for valuation purposes nor as valid sales for purposes of sales ratio studies conducted pursuant to Kan. Stat. Ann. § 79-1485.

Utility-owned property.

For tax year 2024, the deadline for the certification to each county clerk for the amount of assessed value for utility-owned property assigned to each taxing jurisdiction will be extended from June 15, 2024, to July 1, 2024.

Revenue neutral rate.

For tax year 2024, the deadline for the county clerk to calculate the revenue neutral rate for each taxing subdivision is extended from June 15, 2024, to July 1, 2024.