On June 6, 2017, the Kansas Legislature enacted SB 30 into law. SB 30 raises tax rates and repeals the exclusion of income for business, rental and farm income. Changes in deductions and credits (mainly lifting the limitations on itemized deductions and enacting a child and dependent care credit) don’t take effect until 2018.
SB 30’s intent was to repeal many of the key parts of Governor Sam Brownback’s 2012 tax cuts. What many Kansas taxpayers don’t realize is that in the intervening years, the KS Legislature eliminated deductions and credits to try to make up the shortfall caused by the 2012 tax cuts. This included limiting itemized deductions (namely eliminating a deduction for medical expenses and only allowing a 50% deduction for real estate & personal property taxes and mortgage interest) and eliminating the dependent care credit. SB 30 phases these deductions and credits back in, but the phase-in doesn’t start until 2018. This causes some Kansas taxpayers to get hit with a quadruple whammy in 2017.
Let’s take hypothetical taxpayer “BT” as an example. BT is a single dad who owns a small service company. He has two daughters, age 2 and 4. BT owns a home in Johnson County and nets $85,000 from his business (approximately the median income for Johnson County). BT paid $12,750 in child care costs in 2017 for his two daughters. Below is BT’s approximate Kansas tax liability in 2017.
| Approximate Kansas Tax Liability | $2,800 |
| Increase due to tax rate changes | $264.00 |
| Decrease in taxes if could deduct itemized deductions in full | $346.00 |
| Decrease in taxes if DCC implemented | $300.00 |
| Kansas Tax liability if tax rates had not changed and deductions/credits fully implemented | $1,890.00 |
- BT would not have paid any Kansas tax liability in 2016 because all of his income is self-employment income.
- BT is now taxed on this business income. But he is taxed on the new tax rates, not the rates prior to 2017. This raises his tax liability approximately $264.
- BT paid $13,314 in real estate taxes, personal property (auto) taxes and mortgage interest on his home. These itemized deductions are limited to 50% in 2017. If BT was able to deduct these fully, he could have saved $346 ($6,657 * 5.2%).
- BT paid $12,750 in child care costs in 2017. The federal dependent care credit is $1,200. The Kansas dependent care credit (25% of federal credit) will be phased back in, but not until 2018. BT is paying an additional $300 in Kansas tax liability in 2017 because he is not benefiting from the Kansas dependent care credit.
BT is getting hit by a quadruple whammy on his 2017 Kansas tax return because of Kansas tax law changes from 2012-2017. Please contact CPA WorldTax at taxinfo@cpaworldtaxllc.com or 888-512-4860 to see how the Kansas tax law changes will affect you.