Does Kansas Tax Social Security Benefits?
The Sunflower State’s new tax package will have a widespread impact on retirees and young families. Here’s what you can expect.
A new landmark tax relief package is expected to save Kansans millions this year.
Kansas Gov. Laura Kelly signed a measure this summer that eliminates the state’s tax on Social Security income, reduces property and income taxes, and is set to increase the state standard deduction and child and dependent care tax credit.
Senate Bill 1, passed with bipartisan support, is projected to usher in nearly $2 billion in tax cuts for Kansans over the next 5 years. Eliminating state taxes on Social Security income is expected to collectively save beneficiaries as much as $152 million in the first year alone.
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The sweeping tax deal came after lawmakers agreed that Kansans needed tax cuts to relieve inflation without risking a fiscal shortfall. It is also part of tax measures penned to draw in the Kansas City Chiefs or Kansas City Royals to new stadiums in Kansas, according to local reporting.
Kansas repeals tax on Social Security benefits
The number of states that no longer tax retirement benefits is shrinking.
Kansas is finally part of the 41 states, plus the District of Columbia, that no longer tax Social Security benefits.
Before the new law went into effect retroactively on Jan 1, 2024, the state taxed Social Security income for those reporting an adjusted gross income above $75,000, regardless of their filing status.
To date, only nine states still tax Social Security benefits.
According to the governor's office, the state would receive over $100 million in income tax payments every year from Social Security beneficiaries. Advocates of repealing the tax said that the former tax code was unfair to retirees who depend on those benefits to support their daily essentials, like medicine, housing, and food.
“Social Security was never intended to act as a piggy bank for state government spending and should remain in the pockets of hard-working Kansans,” Glenda DuBoise, AARP Kansas State Director wrote for the Kansas Reflector.
Keep in mind that while Social Security income will no longer be taxed at the state level, it could still be subject to tax at the federal level. For more information, see Kiplinger’s report: Social Security and Taxes: Five Things You Should Know.
However, repealing the state tax obligation should give some retirees more control over their finances. That will become more important in upcoming years as the population of Baby Boomers entering retirement age grows.
Note: Kansas still taxes income from private retirement plans, such as out-of-state pensions, IRAs, and 401(ks)s.
Other key Kansas state tax changes
The new tax cut package also made several provisions that will directly impact Kansans' wallets for the better.
Families will now get relief as the state's tax credit for household and dependent care expenses increased from 25% to 50% of the federally allowed amount, effective tax year 2024 (for taxes generally filed in early 2025).
The state standard deduction amounts increase from $3,500 to $3,605 for single filing status, $8,000 to $8,240 for married couples filing jointly, and $6,000 to $6,180 for head-of-households beginning the 2024 tax year.
The state's personal exemption allowance also increases to $2,250 per all persons on the return, $18,320 for married couples filing jointly, $9,160 for all other filers, and $2,320 for each dependent included on the return.
The new law also modifies the individual Kansas income tax brackets to a two-bracket system, according to the Kansas Legislature Research Department. For married couples filing jointly, those with a taxable income of $0 to $46,000 would be taxed at 5.2%, and those above that limit would be taxed at 5.58%.
For all other filers, taxable income of $0 to $23,000 is taxed at $5.2%, while income above that threshold is taxed at 5.58%.
The new law now reduces property taxes by increasing the property tax exemption to $75,000. According to Gov. Kelly’s office, it should save Kansas residential property owners more than $236 million over the next 5 years.
“Now, because we have responsibly budgeted, Kansans will see significant tax cuts without sending us back to an era of fiscal shortfalls,” Gov. Kelly said.
What’s next for Kansas
One interesting point: State lawmakers noted that the tax package could also play a part in luring new economic opportunities. Gov. Kelly also signed House Bill 2001 earlier this summer, a sales tax and revenue (STAR) bonds package, designed to expand Kansas’ portfolio of sports teams.
Reportedly, state lawmakers were set on attracting the Kansas City Chiefs or Kansas City Royals to the state. If successful, it could bring tourism, commercial opportunities, and more.
“We know that modernizing our economic development tools provides the opportunity to increase private investment into the state,” Gov. Kelly said in a release.
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