Moving to Kansas

Kansas has no reciprocal agreement with any state. That one fact shapes most of what follows. A Kansas resident is taxed on everything, wherever earned, and takes a credit for tax paid to another state on the same income; a nonresident is taxed on Kansas-source income, however small; a part-year resident does both for the two halves of the year on Schedule S Part B. The Kansas City metro makes this a daily matter for tens of thousands of households: live in Overland Park and work in Kansas City, Missouri, and you file a Missouri return and a Kansas return every year, with Kansas giving credit for the Missouri tax. The year you move in or out adds one more wrinkle: Kansas computes the tax as if you had been a resident all year, then multiplies it by the Kansas share of your income.

Who is a resident

The statute says a resident is a natural person domiciled in Kansas, and adds a presumption: a person who spends more than six months of the year in Kansas, in the aggregate, is presumed a resident unless the contrary is proven. The Department of Revenue’s booklet puts it in plainer words: a Kansas resident for income tax purposes is anyone who lives in Kansas, regardless of where they are employed, and a person who is temporarily away but intends to return is still a resident. Domicile is the place you consider your permanent home, the one you return to after being away. It is proven by the ordinary evidence: where you vote, where your driver’s license and car registration are, where your spouse and children live, what address is on your federal return and bank statements, and how many days you spend in the state. Owning a second home elsewhere does not change it, and neither does spending the winter somewhere warmer, unless you have genuinely moved your permanent home and can show it.

A nonresident is anyone who is not a resident. A part-year resident was a Kansas resident for fewer than twelve months of the year: the person who moved in on June 1 or moved out on September 30.

The part-year return

A part-year resident files Form K-40, enters the dates of Kansas residency on the front, and completes Schedule S Part B. The mechanics are not what most people expect. Kansas does not tax the Kansas-period income directly. Instead:

• Part B lists income from Kansas sources, line by line: wages earned while a Kansas resident or for work in Kansas, interest and dividends received while a resident, pensions and IRA distributions received while a resident, Kansas rental and business income, and so on. Line B12 totals it, lines B13 to B21 apply the federal adjustments and Schedule S modifications that belong to that income, and line B21 is modified Kansas-source income.
• Line B23 divides line B21 by Kansas adjusted gross income for the full year (K-40 line 3) to get the nonresident allocation percentage, to four decimal places.
• The K-40 then figures the tax on the full year’s income, with the full standard or itemized deduction and the full exemptions, as if you had lived in Kansas all year.
• That tax is multiplied by the percentage. The result is the Kansas tax.

Because the tax is prorated rather than the income, the deductions and exemptions are in effect prorated too. A person who earned $30,000 of a $90,000 year in Kansas does not get the whole $9,160 exemption against the $30,000; they get one third of the tax a full-year resident would pay on $90,000. The arithmetic is in the worked example below. Nonresidents use the same Part B, with Kansas-source income only in the first column.

Income is sourced by where you lived when you received it or where the work was done. Wages for work performed in Kansas are Kansas-source whoever you are; wages for work performed elsewhere are Kansas-source only while you were a Kansas resident. Interest, dividends and capital gains follow residency on the date received or realized. Rent from Kansas property and income from a Kansas business are Kansas-source at any time. Pension and IRA payments received after you leave Kansas are not Kansas income, and federal law since 1996 bars Kansas from taxing the retirement income of someone who no longer lives here, however many years the pension was earned in Kansas.

Working across the line: two returns and a credit

A Kansas resident who works in another state owes that state tax on the wages earned there, and owes Kansas tax on the same wages as a resident. Kansas prevents the double tax with the credit for taxes paid to other states on line 13 of the K-40. The rules, in the booklet’s words and the Department’s WebFile instructions:

• Complete the other state’s return first. The credit is based on that return.
• The credit is the tax actually owed to the other state on income also taxed by Kansas, limited to the Kansas tax on that same income. “Your credit is NOT the amount of tax withheld in the other state(s).” If the other state withheld $4,000 but its return shows $3,200 of tax, the credit starts from $3,200.
• Enclose a copy of the other state’s return and supporting schedules with the K-40. A W-2 showing the other state’s withholding is not accepted.
• The income must be included in Kansas adjusted gross income. Income Kansas does not tax, such as a public pension subtracted on Schedule S, earns no credit even if another state taxed it.
• Tax paid to more than one state is combined on one line.

The credit is for income tax paid to a state, not to a city. A Kansas City, Missouri earnings tax withheld from a Kansas resident’s paycheck is not creditable on the K-40 (verify). Nonresidents who work in Kansas file a K-40 with Part B for the Kansas wages and claim the credit on their home state’s return instead; Kansas gives nonresidents no credit.

Withholding follows the same split. A Kansas resident working in Missouri will have Missouri tax withheld by the employer, and often no Kansas tax. The Kansas tax after the credit is usually small but not zero, since Kansas’s rates and Missouri’s differ and the credit is capped at the Kansas tax on the income; filing a Form K-4 asking the employer to withhold Kansas tax too, or making a fourth-quarter estimated payment, avoids a balance due and the Schedule K-210 penalty.

Remote work

Kansas has no “convenience of the employer” rule. A nonresident is taxed on wages for work physically performed in Kansas, and only that; days worked from home in another state for a Kansas employer are not Kansas-source. A Kansas resident who works from a Kansas home for an employer in another state owes Kansas on all of it, as a resident, and owes the other state only to the extent that state taxes work done outside its borders. Where an employee splits time, a day count by state, kept contemporaneously, is what the Department and the other state will both ask for. Where an employer withheld for the office state on days worked at home in Kansas, the fix is the line 13 credit for whatever that state does end up taxing, and a nonresident refund claim there for the rest.

Military

Active and reserve military pay is taxed only by the servicemember’s state of legal residence. A Kansas resident stationed anywhere owes Kansas on all income, military pay included. A nonresident servicemember stationed in Kansas does not owe Kansas on military pay, and subtracts it on Schedule S line A15 if a Kansas return is needed for other Kansas income; a nonresident spouse who keeps the servicemember’s home state under the federal Military Spouses Residency Relief Act is treated the same way for wages earned in Kansas. Military retirement pay is subtracted on line A14 for a Kansas resident, and recruitment, sign-up and retention bonuses on A17. The Department’s Publication IA-36 covers the rest.

The year you move: what to do

• Fix the date. The day you took up residence in the new home, with the lease or closing statement to prove it. Everything else keys off it.
• Change the withholding. Give the employer a Kansas Form K-4 on arrival so Kansas tax starts; on leaving, stop it and start the new state’s. Employers do not do this on their own.
• Split the income by date. Keep the last pay stub before the move, and ask payers of pensions and IRAs for a payment-by-payment history. Brokerage 1099s report the whole year; you will need the dates of dividends and sales.
• Move the evidence of domicile. Driver’s license, voter registration, car registration, the address on the federal return and on every financial account. A former state that taxes income will look at exactly these if it questions the move.
• Retirement income. If you moved into Kansas, Social Security and public pensions received after the move are subtracted in full on Schedule S; IRA and private pension payments received after the move are Kansas income. If you moved out, nothing received after the move is Kansas income.
• Property tax refunds. The K-40H, K-40PT and K-40SVR claims require Kansas residency for the whole year and a Kansas home you owned and occupied, so the move year usually does not qualify; a new home also starts a new base year for the senior freeze.
• Estimated payments. If the new state’s withholding is not in place, or you have a large gain from selling the old house that is taxable, a payment by the next K-40ES date avoids the penalty. The federal home-sale exclusion carries over to Kansas because the K-40 starts from federal AGI.
• Two returns, one federal. File the former state’s part-year return and the Kansas part-year return from the same federal return. Software handles the allocation if the dates and the by-period income are entered; it will not guess them.