Does Kansas Tax Social Security and Pensions?
Understand how Kansas tax law applies to your retirement income. Learn how your income level and benefit source determine your state tax liability.
Kansas tax law contains specific provisions for income from Social Security and various pension plans, which often diverge from federal tax regulations. The state provides exemptions aimed at easing the tax burden for retirees, contingent on factors like income levels and the specific source of the retirement benefits.
Kansas Taxation of Social Security Benefits
Recent legislative changes have altered the taxation of Social Security benefits in Kansas. Effective from the 2024 tax year, Kansas no longer taxes Social Security income, regardless of a taxpayer’s income level. This new law, passed in mid-2024, eliminates the previous rule that subjected Social Security benefits to state tax for individuals with a federal Adjusted Gross Income (AGI) over $75,000.
Prior to this change, if a taxpayer’s federal AGI exceeded the $75,000 threshold, their Social Security benefits were taxed by Kansas to the same extent they were taxed at the federal level. For federal purposes, up to 85% of Social Security benefits can be included in taxable income, depending on the recipient’s combined income.
State Tax Treatment of Pension and Retirement Income
Kansas provides favorable tax treatment for specific types of retirement income, offering full exemptions for certain government and military pensions. All military retirement pay received by veterans is exempt from Kansas income tax. To claim this, the retirement pay must first be included in federal AGI before it can be subtracted on the state return.
Similarly, retirement benefits administered by the U.S. Railroad Retirement Board are not subject to Kansas income tax. This applies to the Tier 1, Tier 2, vested dual benefits, and supplemental annuities that retired railroad workers and their families may receive. Like other exempt pensions, these amounts must be part of the federal AGI to qualify for the subtraction at the state level.
Income from the Kansas Public Employees Retirement System (KPERS) is also fully exempt from state taxation. This exemption extends to distributions from qualified retirement accounts, like a 401(k) or IRA, if the funds originated from a rollover of KPERS benefits.
However, income from most other retirement sources, including private pensions, 401(k)s, and traditional IRAs from out-of-state or corporate plans, is generally fully taxable at Kansas’s regular income tax rates.
How to Claim Retirement Exemptions in Kansas
To claim exemptions for retirement income on a Kansas tax return, taxpayers must use Form K-40, the Kansas Individual Income Tax return, and complete the associated Schedule S, Part A – Modifications to Federal Adjusted Gross Income. This schedule is where subtractions from federal AGI are itemized to calculate Kansas taxable income. Each type of exempt income has a specific line for reporting the subtraction.
For Social Security benefits, taxpayers will report the federally taxed portion of their benefits as a subtraction modification on Schedule S. This entry removes the income from the state tax calculation. The process requires taxpayers to first include it as it appears on their federal return and then subtract it on the Kansas schedule.
To exempt military retirement pay or railroad retirement benefits, the process is similar. The taxpayer must enter the total amount of these federally taxed benefits on the designated line on Schedule S, Part A. The amount being subtracted must have been included in the federal AGI figure reported on the Kansas Form K-40.