As on your federal return, on your Kansas return you have a choice between itemizing deductions and taking the standard deduction if you itemized your deductions on your federal return. Itemizing on your federal return does not always mean you will itemize on your Kansas return.
Because federal and state rules differ, you may be better off itemizing deductions on one return and claiming the standard deduction on the other. The Kansas rules differ in that:
The Kansas standard deduction is $3,000 to $6000 depending on your filing status.
Kansas does not allow certain itemized deductions you were able to take on your federal return, for example, state and local taxes.
It's a good idea to compare your Kansas itemized deductions (qualifying federal itemized deductions, less state and local taxes) with your Kansas standard deduction to see which saves you more. During the Kansas interview which you'll go through to complete your Kansas return, we'll look at both options and select the option which saves you more.
If you're married filing a separate return, you and your
spouse will need to use the same option on your Kansas return. For
example, if you're married filing separately and your spouse is itemizing
deductions on his or her Kansas return, you'll also need to itemize deductions
on your Kansas return.
Looking for an investment that comes with tax breaks? You may want to consider investing in state bonds.
If you're a resident of Kansas, the interest you receive on Kansas bonds is tax-exempt not only on your federal return, but on your Kansas return as well. Interest you receive from out-of-state bonds is also tax-exempt on your federal return, but not on your Kansas return.
Contact your broker to learn more about state bonds and bond funds to see if they might be right for you.
If you reported interest from U.S. government sources on your federal return, you can receive a tax break for this on your Kansas return. Interest from these U.S. government sources is tax-exempt in Kansas:
This applies even if you receive the interest income through a mutual fund or money market fund that invests in these sources. If you have U.S. government interest, it will have been reported to you on your Form 1099-INT, Form 1099-DIV, or Schedule K-1.
You'll still need to report the income on your Kansas return, even though you won't be taxed on it. We collect the information about your U.S. government interest based on information in your federal return and will subtract it automatically from your taxable Kansas income.
Kansas taxpayers often overlook an important subtraction related to their state tax refund and end up paying more tax than they should.
A state tax refund that you included in your federal income doesn't necessarily have to be included in your state income.
If you received a state tax refund in 2007, you can report the amount as a subtraction on this year's Kansas tax return if:
Here's how this works: You were allowed to deduct the 2006 state income taxes you paid as a federal itemized deduction on your 2006 federal return. Because Kansas does not allow this deduction, when you got your 2006 Kansas refund, you were required to report the state taxes as an addition to your Kansas income.
If you received a refund in 2007 of some or all of the 2006 state taxes you paid, you're required to report it as federal income on your 2007 federal return. This allows the federal government to recoup the income tax you would have paid on the amount if you hadn't previously deducted it.
Kansas uses the income amounts reported on your 2007 federal return as the starting point for figuring your 2007 Kansas income. Because there may be amounts included in your federal income that aren't taxable in Kansas, you may need to make some subtractions to arrive at your Kansas income. Your state refund is one of these amounts. Because you've already included the amount in your Kansas income (when you reported it as a 2006 addition to your income), you do not need to pay tax on it again. To avoid paying tax again, you must report the amount as a subtraction on your Kansas tax return. This is the subtraction Kansas taxpayers often overlook which leaves them overpaying their tax.
This also applies to refunds you received in 2007 of taxes you paid in a year prior to 2006.
We'll cover Additions and Subtractions, including a subtraction for the state tax refund, in the Kansas Interview to complete your Kansas tax return.
Kansas offers a college savings (529) plan, the Learning Quest Education Savings Program, to help you save and pay for a future college student's education. These are some of the benefits of saving through the Learning Quest Education Savings Program.
To learn more about the Learning Quest Education Savings Program, go to www.learningquestsavings.com .
If you filed an extension, be sure to enter the amount you paid with your extension on your Kansas return. It's important to enter this amount on your Kansas return so that you avoid having the state taxing authority bill you for interest and penalties you'd owe for paying your taxes late—and so you don't end up paying more tax than you need to with your return.
We'll ask about the payment you made with your extension in the Kansas Interview to complete your Kansas tax return.
Certain payments you make on this year's Kansas tax return can be valuable deductions on next year's federal tax return.
These are payments taxpayers often forget about over the course of the year. Be sure you keep track of these payments so you can take full advantage of the deduction when it comes time to complete your 2008 federal tax return. You may even want to keep a reminder with other information you keep to complete your 2008 tax return.
When you come face-to-face with the bottom line on your tax return, it's not always welcome news. A large balance due can mean underpayment penalties and a scramble to pay the bill. Although many people feel that a refund is a windfall, a large refund means that you've given a long-term, tax-free loan to Kansas. Taking simple steps now can help you avoid a surprise next April: