July 1, 2017
In June the Kansas legislature passed a new income tax bill and then overrode Governor Brownback's veto to make it law. This new law officially ends Governor Brownback's "Kansas experiment" which was intended to eventually take Kansas income taxes down to zero. The effective date of this law is technically July 1, 2017, but it contains many provisions that are retroactive to the beginning of this year. However, the law specifically states that no on will owe penalties for underpayment of estimated taxes in 2017 because of the changes in the law. The changes for 2017 are:
1. The "business pass-through exemption" is eliminated. Income from rental real estate, oil and gas royalties, partnerships, S corporations, estates, trusts, limited liability companies (LLC's) and farm income is once again subject to Kansas income tax.
2. On the other hand, any losses from the businesses listed above will once again be deductible from Kansas income, and the deductions for self-employment taxes, contributions to pension, profit sharing and annuity plans and health insurance for self-employed individuals will once again be allowed.
3. Instead of just two income tax rates, there will now be three income tax rates, and for 2017 these rates are:
$60,00 and above--5.2%
There are more changes coming in 2018, including a further small increase in the three income tax rates, and the gradual phase-in of various itemized deductions and the child care tax credit which were not allowed under the previous law and are still not allowed for 2017. This tax plan is expected to increase Kansas tax revenue by $1.2 billion dollars in the next two years and it enabled the legislature to pass a balanced budget and a new school funding law.
January 1, 2016
In late December, Congress passed, and the President signed the grandly titled "Protecting Americans From Tax Hikes Act of 2015." The main purpose of this act was to make permanent many tax relief provisions that had expired at the end of 2014 or 2015. These extensions were made retroactive to the beginning of 2015. There are over twenty of these changes in the new law, but one of the most important of these for individual taxpayers continues the option of deducting state and local sales tax instead of state income tax on your federal return. If you thought that this or other specific federal tax provisions that benefited you had expired, you may be pleasantly surprised to discover that these tax provisions have now been extended.
On the other hand, if you are a Kansas resident and you itemize your deductions, you may find an unpleasant surprise on your Kansas income tax return. The tax increase that the Kansas legislature passed last summer not only raised the sales tax rate, it also removed all itemized income tax deductions except charitable contributions and one-half of mortgage interest and real estate taxes paid, and this change was made retroactive to January 1, 2015.
Also, the federal estate tax exemption was $5.43 million in 2015, and will increase to $5.45 million in 2016, but the annual gift tax exclusion will remain at $14,000 per person per year for 2016.
September 1, 2015
The 2015 Kansas Tax Amnesty Program begins today and continues through October 15, 2015. This program provides an amnesty from the assessment or payment of all penalties and interest with respect to unpaid taxes due and owing for tax periods ending on or before December 31, 2013, but only if the unpaid taxes are paid in full during the amnesty period and an amnesty application is submitted at the time of payment.
July 31, 2015
The Surface Transportation and Veterans Health Care Choice Improvement Act of 2015, signed intolaw on this date, actually includes a federal estate tax provision. For all federal estate tax returns due after this date, the executor must advise both the IRS and the estate's beneficiaries of the values used for the assets in the estate within 30 days after the estate tax return is filed. This creates a new reporting requirement that executors of taxable estates need to be aware of.
The tax plan passed by the Kansas Legislature and signed by the Governor this month is the largest tax increase in Kansas history. New taxes will increase by $384 million with an additional $47 million paid by managed care organizations for the privilege of offering health care plans in Kansas. The tax plan will also:
Increase the state sales tax to 6.5 percent (previously 6.15 percent);
Raise tobacco taxes by 50 cents a pack;
Eliminate all itemized deductions on personal income tax returns except for
the charitable deduction and 50% of the mortgage interest and real estate
tax deduction; and
Offer a tax amnesty plan (which is projected to generate $30 million
in previously unpaid taxes).
Federal Estate Tax: The basic exclusion amount increases to $5,430,000 for 2015. This means Executors must file an estate tax return if the decedent's gross estate exceeds $5,430,000.
Federal Gift Tax: The gift tax annual exclusion remains at $14,000 per person per calendar year for 2015.
Federal Income Tax: Beginning in 2015, taxpayers will be allowed to make only one IRA-to-IRA rollover per calendar year.
Kansas law: Kansas has amended the Uniform Trust Code (effective July 1, 2014) to make it clear that inherited assets held in trust for the benefit of a beneficiary where the beneficiary is serving as sole Trustee are entitled to protection from creditors as long as the trust distributions to the beneficiary are subject to an ascertainable standard relating to the beneficiary's health, education, support or maintenance. This means that if you want leave something to a beneficiary in trust, you can name that beneficiary as the sole Trustee and, if the trust agreement contains the correct language, those assets will still be protected from that beneficiary's creditors. This change, especially with the U. S. Supreme Court decision regarding inherited IRA's (see below), may make it more desirable to leave a beneficiary's inheritance in a trust instead of leaving it to the beneficiary outright.
Federal law: IRA's set up by the original owner are not subject to creditors or bankruptcy proceedings, but the U. S. Supreme Court has now held that inherited IRA's (where the owner has died and left another person as the beneficiary) are subject to creditors of the beneficiary and bankruptcy claims.
Federal estate tax: Beginning in 2014 the basic exclusion for gifts and estates has increased to $5,340,000. This means executors must file a federal estate tax return if the decedent's gross estate at death exceeds $5,340,000.
Federal gift tax: For 2014 the gift tax annual exclusion has increased to $14,000 per person per calendar year.
Federal income tax: Beginning in 2014, individuals must have health care coverage, have a health coverage exemption, or make a shared responsibility payment with their tax return.