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On June 21, 2024, Kansas Governor Laura Kelly signed into law Senate Bill 1 (SB 1), which includes a reduction in income tax rates for Kansas Privilege Tax, effective with the 2024 tax year. If you’re a financial institution calculating income tax provisions or recording deferred taxes (including those on your AFS bond portfolio), pay careful attention to the tax rate you’re using.
Changes include:
- Income tax rate of 2.25% net income reduced to 1.94% for state and national banking associations
- Income tax rate of 2.25% net income reduced to 1.93% for trust companies and savings and loan associations
- Surtax remains at 2.125% of net income exceeding $25,000
Other SB 1 changes that may impact you or your customers include:
- Income Tax Structure Modification: Kansas will transition from a three-bracket to a two-bracket income tax system, reducing the top tax rate from 5.7% to 5.58%.
- Increased Standard Deductions: The legislation increases the standard deduction from $3,500 to $3,605 for single filers and from $8,000 to $8,240 for married couples filing jointly.
- Increased Personal Exemption Allowance: The personal exemption allowance will significantly increase from $2,250 to $9,160 for single filers and from $4,500 to $18,320 for married couples filing jointly, with an additional $2,320 for each dependent.
- Social Security Benefits Exemption: Starting in 2024, all Social Security benefits will be exempt from taxation in Kansas, removing the $50,000 limit for the subtraction modification.
- Increased Credit for Household & Dependent Care Expenses: The credit for household and dependent care expenses will increase from 25% to 50% of the federally allowed amount.
- Residential Property Tax: 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 Appraisal Protections: SB 1 includes a provision to prevent the use of sale prices from 1031 exchanges as indicators of fair market value for tax appraisal purposes, ensuring more accurate and fair property valuations.
Reach out to a Pinion advisor for expert guidance on how to navigate these 2024 tax changes.
