A new law raising income tax rates goes into effect on Saturday, but the impact on taxpayers will stretch back to January.
Lawmakers passed Senate Bill 30 over Gov. Sam Brownback’s veto to raise about $1.2 billion over two years to help balance the budget.
The action to roll back much of Brownback’s 2012 tax cuts came after weeks of gridlock over taxes. Brownback contends the tax increases represent a step backward for the state. Income tax rates still will be lower than they were before the 2012 tax cuts.
Rates will rise this year, retroactive to January, and then will rise again next year. Here’s what to expect.
Under the 2012 tax policy, personal income has been taxed at two rates: 2.7 percent and 4.6 percent. For married couples filing jointly, taxable income up to $30,000 has been taxed at the lower rate and income above $30,000 has been taxed at the higher rate.
SB 30 creates a new bracket and raises the rates.
▪ Taxable income up to $30,000 will now be taxed at 2.9 percent.
▪ Taxable income between $30,000 and $60,000 will be taxed at 4.9 percent.
▪ Taxable income above $60,000 will be taxed at 5.2 percent.
The brackets for single filers are half the amounts that they are for married filers.
The new rates will apply to all of 2017.
Beginning in 2018, personal income tax rates will climb again.
The 2018 rates, for married couples filing jointly:
▪ Taxable income up to $30,000 will be taxed at 3.1 percent.
▪ Taxable income from $30,000 to $60,000 will be taxed at 5.25 percent.
▪ Taxable income above $60,000 will be taxed at 5.7 percent.
The Kansas Department of Revenue has released new tables that, if followed by businesses, will have them increase their withholdings beginning on July 1 to match 2018 rates.
In a statement, the agency said it is using the 2018 rates in its tables for 2017 to “ensure that enough income is withheld from paychecks to catch up for the increased and backdated tax liability in the second half of the year, and also to provide certainty for Kansas employers.”
“There are a lot of variables with tax increases. It’s best to be prepared well in advance to ensure it doesn’t destroy your budget,” Revenue Secretary Sam Williams said in a statement.
Nonwage business income
SB 30 also 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 will no longer be able to collect the profits of their businesses tax-free.
The income will once again be subject to income tax, and the change is retroactive to Jan. 1. The Department of Revenue suggests business owners make their tax payments quarterly.