One or both might still work, receive additional pensions or draw down retirement savings from investments. That’s a long way from $75,000 - the threshold at which Social Security income is taxed - so why is that number important? Retirees often have more sources of income than Social Security. A married couple, both making the average amount, would receive $41,328 annually. One retiree making this would receive $20,664 annually. In Kansas, the average retiree’s monthly benefit was $1,722 in 2021, Eric Adell, a tax policy research analyst with the Kansas Legislative Research Department, said in 2023. To fully understand the impact of the existing Social Security “cliff,” some math is required. “Tax cliffs like this one create fairness concerns because there is no reason two taxpayers with only one dollar difference should have such stark differences in state tax liability,” said Katherine Loughead of the Tax Foundation, a nonpartisan national tax policy nonprofit, in testimony to the special committee on taxation last year. This means that a retired couple with $75,001 AGI could potentially owe $1,500 in more in state taxes than a couple earning $75,000. Under current Kansas law, recipients of Social Security must pay state tax on all their Social Security income benefits if their adjusted gross income exceeds $75,000, even by $1. Their incomes would fall below the threshold of being taxed by the state.īut, according to IRS data, 165,000 Kansas filers over the age of 65 had incomes of $75,000 or more - representing nearly 40% of households filing tax returns. This tax treatment is not an issue for most Kansas retirees living off nothing but Social Security income. The state also taxes Social Security income for households with adjusted gross incomes (AGI) above $75,000. Are Social Security payments and pensions taxed in Kansas?Ĭurrently, Kansas fully taxes income from private retirement plans, such as IRAs and 401(k)s, and out-of-state pensions.
Laura Kelly and leaders in the Kansas Legislature want to change that. Kansas is considered one of the least “tax-friendly” states to retirees – and both Gov. Not all states tax Social Security and retirement benefits the same. GOP leadership said at a virtual town hall meeting Monday that it is one vote short of overriding the veto. Both Kelly and GOP leadership support the tax cut, but Kelly said a flat-tax on income was a dealbreaker. Kelly vetoed a bill that would completely eliminate the tax on Social Security benefits. A similar tactic was tried this year, and the governor has once again vetoed the tax cut proposal. The effect of bundling the differing plans meant that every tax cut proposal last session died. Lawmakers tried passing a bill that included tax plans that Kelly both supported and opposed. Though Kelly supported the change, she opposes the larger bill that would have created a flat income tax of 5.15% for all filers. Laura Kelly vetoed legislation approved by the Kansas Legislature that would have – gradually over five years – increased to $100,00, from $75,000 the total annual income a taxpayer may have and not pay state income taxes on the portion that is Social Security income. But lawmakers are trying again - this time with more bipartisan support.
Kansas lawmakers failed to cut Social Security taxes in 2023. Update: This story was from the 2023 Legislative session, but it has been updated for the 2024 Legislative session and is up-to-speed on Statehouse action as of Jan.