To Couple or Not to Couple: That is the Question
Kansas Bill HB 2005’s Potential Impact on 2020 Tax Returns
By Donald G. Grossardt
To rephrase Shakespeare’s famous quote in Hamlet underscores the dilemma facing the Kansas legislature again this session. Despite Governor Laura Kelly again threatening to veto, HB 2005 is working its way through the legislative process.
The bill, if enacted into law, would “de-couple” Kansas from the federal law when it comes to income tax. In short, the bill would allow an individual to itemize deductions in Kansas without itemizing on their federal tax return.
Background: TCJA & Standard Deduction
To recap the issue, with the passage of the Tax Cut and Jobs Act of 2017 (TCJA), the federal standard deduction was raised dramatically to $12,000 and $24,000 for single and married filing jointly returns, respectively. The standard deduction for head of household status was also raised significantly. However, the Kansas standard deduction remained unchanged (and significantly lower than the new federal amount). Current Kansas law requires taxpayers to take the (Kansas) standard deduction on their state return if they take the standard deduction on their federal return.
This created a nasty surprise for many taxpayers on their 2018 returns. For taxpayers who itemized prior to the TCJA and decided that the higher federal standard deduction was more advantageous, taking the lower Kansas standard deduction minimized (and in a few cases eliminated) the tax cut of the TCJA.
Last year, the Kansas legislature passed a bill that would have de-coupled Kansas from federal law. However, it was vetoed by the governor and the legislature did not have the votes to override the veto. At the time of this writing, the House Committee on Taxation is recommending that HB 2005 be passed out of committee with a few minor clerical amendments.
The big caveat: if enacted, the law would not affect 2019 returns, but would be effective for the 2020 tax year.
This potential legislative change will impact many taxpayers. Though de-coupling is not on the table for 2019 tax returns, stay tuned for 2020. Your Adams Brown team will keep you informed of developments as they become clear. As always, feel free to contact the Adams Brown team to learn more.
Don Grossardt, CPA, recently retired from full-time employment after a 45-year career, the vast majority of which was as a CPA in public accounting. He continues to be associated with Adams Brown on an as-needed, project-specific basis.