This has been an eventful year for tax law changes in Kansas. On June 20, 2024, Gov. Laura Kelly approved Senate Bill No. 1, and some provisions of the new law took effect on July 1, 2024. While most of us will see lower taxes overall due to these changes, some could see an increase. We’ll discuss these groups below.
Understanding what the tax law changes mean for each of us individually can be confusing. So, let’s look at the different parts of the bill separately. The biggest change that will apply to everyone is the new tax brackets. Previously, there were three brackets – but starting in 2024, there will be only two.
Tax Bracket Changes
| New Bracket | Taxable Income | Tax Rate |
|---|---|---|
Married Filing Jointly (MFJ) |
$0-46,000 |
5.2% |
$46,001 and over |
5.58% | |
All other individuals |
$0-23,000 |
5.2% |
$23,001 and over |
5.58% |
In 2023, the brackets were 3.1%, 5.25% and 5.7%, respectively, with different thresholds for each. Therefore, individuals previously in the lower bracket could see an increase in state tax for 2024. But those who were in the highest brackets will enjoy a lower tax rate going forward.
Deduction and Exemption Changes
These changes will also impact most individuals in Kansas. Standard deductions and exemptions have increased for all taxpayers. This means that you will be paying tax on less of your income going forward. The new standard deductions are $3,605 for single filing status, $8,240 for married filing joint and $6,180 for head of household. And the personal exemption changed from a straight $2,250 per person, to $18,320 if your are married filing a joint return, $9,160 if you are filing any other status and an additional $2,320 per dependent claimed on your federal return.
Taxes on Social Security Eliminated
This bill also eliminated state tax on Social Security Benefits. For many older Kansans, this may mean they no longer have a state filing requirement. But if you qualify for some Kansas or local relief programs you may need to file a state return so that you can apply. For more information, please see our FAQ article on this matter.
Increase in Dependent Care Credit
For families with dependents in care programs, there is an increase in the amount of dependent care credit you will receive on your Kansas return. In 2024, it will increase to 50% of the federally allowed amount. This doubles the 2023 credit of 25% of the federal amount. For those that pay for dependent care, this is a welcomed increase.
Property Tax Reduction
A change that will affect your tax return indirectly is the property tax exemption adjustment on property used for residential purposes. Starting in 2024, the exemption increases from $40,000 to $75,000. This means that residential property tax will be assessed on only the value over $75,000. As a result, if your home has been valued by the tax assessor at $200,000 you will pay taxes on only $125,000.
This is a positive change and results in lower real estate tax on personal property. But paying lower taxes could mean that you are not able to itemize on your Kansas or federal return going forward. The amount of property taxes paid each year is used to determine your total itemized deductions.
The lower deduction for property taxes could make a difference in your federal tax liability, if your itemized deductions were only slightly more than your standard deduction. But with the higher standard deduction in Kansas most will not see an overall change to tax liability for your state return. The most notable difference will be that a Schedule A may not be present in your 2024 tax return.
Food and Food Ingredients Sales Tax
Though not a tax return item, the bill also protected the elimination of food sales tax in Kansas. It got rid of a plan set to repeal the reduction on July 1, 2024. Now, the 2% food sales tax will continue till the end of the year. And on January 1, 2025, the tax will drop to 0%. This will help all of us keep more of our hard-earned money.
Conclusion
With all these changes announced on January 1, 2024, the time to plan for them is very short. By working with your tax and your financial planners now and going forward, you can maximize your tax savings. This could change the timing of Roth conversions or allow you to put more money into a retirement account. It could also help you put money away for planned life events a little faster.
If you are not working with a team of advisors, the implications of the tax savings may be overlooked by a financial advisor working alone. If you would like to see what our advising team can do for you, please schedule a free consultation. We have financial advisors, CPAs and a legal team that can confer to give you the best outcome possible.