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How you could be affected by Kansas’ new tax increases

Gov. Sam Brownback, commenting Wednesday about the Legislature’s override of his veto of a bill increasing income taxes, says the resulting increases will be bad for the long-term health of the state’s economy.
Gov. Sam Brownback, commenting Wednesday about the Legislature’s override of his veto of a bill increasing income taxes, says the resulting increases will be bad for the long-term health of the state’s economy. Associated Press

So how much more can you expect to pay, now that lawmakers have increased income taxes in Kansas?

The Legislature voted late Tuesday night to override Gov. Sam Brownback’s veto of a package of tax increases intended to generate about $1.2 billion over the next two years. The tax changes are meant to close a projected budget shortfall of about $900 million over that time and pay for additional school funding.

Here’s a quick look at what the tax bill contains – and how its tax increases could affect you – based on information from legislative researchers and an Eagle analysis of the bill.

Income taxes

Everyone who pays income taxes would pay more under the bill. The plan would replace the state’s two-bracket income tax system with three brackets.

Here’s how the new brackets would look for married couples filing joint tax returns for 2018 and beyond.

▪ Taxable income from $0 to $30,000 would be taxed at 3.1 percent, up from 2.6 percent. Before the 2012 tax cuts, this income was taxed at 3.5 percent.

▪ Taxable income from $30,001 to $60,000 would be taxed at 5.25 percent, up from 4.6 percent. Before the 2012 tax cuts, this income was taxed at 6.25 percent.

▪ Taxable income above $60,001 would be taxed at 5.7 percent, up from 4.6 percent. Before the 2012 tax cuts, this income was taxed at 6.45 percent.

Single filers would be taxed at the same rates, but their bracket incomes are half of those in the married brackets – from $0 to $15,000, $15,001 to $30,000, and above $30,0001.

The increase partially phases in this year, with the full, new rates beginning in 2018. For tax year 2017 – the current year – the rates will be 2.9 percent, 4.9 percent and 5.2 percent for corresponding brackets of $0-30,000, $30,001-60,000, and $60,001+ for married couples filing jointly.

While every taxpayer’s situation is different, using the rates alone, here’s how much more some earners could expect to pay for tax year 2018.

▪ A couple making $40,000 a year in taxable income after deductions would pay about $215 more.

▪ A couple making $80,000 a year in taxable income would pay about $565 more.

▪ A single person making $35,000 a year in taxable income would pay about $227 more.

Low income

A provision that excludes low-income earners from paying tax would be scaled back – meaning some people who don’t pay income tax now would begin paying.

Currently, married couples who have taxable income of $12,500 or less are exempt from income tax. The threshold would fall to $5,000.

For single filers, the current threshold of $5,000 would fall to $2,500.

Businesses

The bill repeals a tax exemption for nonwage business income that comes from pass-through business entities, such as limited liability companies.

In effect, owners of LLCs would no longer be able to collect the profits of their businesses tax-free.

The exemption was put in place as part of the 2012 tax policy. That income would again be subjected to income tax, retroactive to Jan. 1.

Taxpayers could also again claim nonwage business income losses.

Child care

The child and dependent care tax credit, eliminated in the 2012 tax cuts, would be brought back.

Taxpayers could claim 12.5 percent of the allowable federal amount in tax year 2018, 18.75 percent in 2019 and 25 percent in 2020 and after that.

Medical expenses

Individuals would be able to deduct up to 50 percent of medical expenses now allowed as itemized deductions under federal law for tax year 2018, according to legislative researchers. The amount would increase to 75 percent in tax year 2019 and 100 percent in tax year 2020 and after that.

Mortgage interest

Itemized deductions for mortgage interest would rise to 75 percent of federally allowable amounts, up from 50 percent currently, in tax year 2019. It would rise to 100 percent in tax year 2020.

Jonathan Shorman: 785-296-3006, @jonshorman

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