Can I deduct 529 education savings or ABLE account contributions on my Kansas return, and when?

Plain-English summary

Kansas Notice 24-03 explains a change 2024 Senate Bill 360 (Section 2) made to the Kansas income tax subtraction for contributions to 529 education savings accounts and ABLE accounts, found in K.S.A. 79-32,117(c)(xv).

The subtraction lets a taxpayer reduce Kansas income by contributions to:

• a family postsecondary education savings account under the Kansas program or another state's qualified tuition program under Section 529 of the Internal Revenue Code, or
• an ABLE (achieving a better life experience) account under the Kansas ABLE program or another state's qualified ABLE program under Section 529A of the Internal Revenue Code.

The subtraction is capped at $3,000 per designated beneficiary for an individual and $6,000 for a married couple filing jointly.

What changed. Before, a contribution could be subtracted only for the year it was made. For tax years beginning after December 31, 2022, a taxpayer may elect to apply a contribution made on or after January 1 but before the following year's return filing date to the prior tax year -- much like an IRA contribution. The election must be made when the return is filed. For this purpose the filing date is April 15, and extensions of time to file are not recognized. No contribution may be used as a subtraction in more than one tax year.

The notice also reminds taxpayers that K.S.A. 79-32,117(b)(x) requires an addition modification for nonqualified withdrawals from a postsecondary education savings account. There is no addition modification for withdrawals from an ABLE account.

What this means for you

Savers contributing to 529 or ABLE accounts

• You can subtract up to $3,000 per beneficiary ($6,000 married filing jointly) in contributions from your Kansas income.
• For 2023 and later returns, if you contribute early in the following year (before your April 15 filing date), you can elect to count it on the prior year's return -- helpful if you want the deduction sooner. You must make the election when you file, and extensions do not extend this window.
• Never count the same contribution twice; it can be used in only one tax year.
• If you take a nonqualified withdrawal from a 529 postsecondary education savings account, you may owe an addition modification. ABLE account withdrawals are not subject to that addition.

Common questions

How much can I subtract? Up to $3,000 per designated beneficiary for an individual, or $6,000 for married filing jointly.

Which accounts qualify? 529 qualified tuition programs and 529A ABLE accounts (Kansas or another state's).

Can I count an early-following-year contribution on last year's return? Yes, for tax years beginning after December 31, 2022, by electing at filing to apply a January 1-to-April 15 contribution to the prior year. Extensions are not recognized.

Is there a claw-back? A nonqualified withdrawal from a postsecondary education savings account requires an addition modification; ABLE withdrawals do not.

Citations and references

• Senate Bill 360 (2024) -- Section 2 expanded the 529/ABLE subtraction to allow the prior-year election.
• K.S.A. 79-32,117 -- Kansas addition and subtraction modifications; subsection (c)(xv) is the 529/ABLE contribution subtraction.
• K.S.A. 79-32,117(b)(x) -- addition modification for nonqualified postsecondary education savings account withdrawals.
• K.S.A. 79-3221 -- the income tax return filing date referenced for the prior-year election.
• Internal Revenue Code Sections 529 and 529A -- the federal qualified tuition and ABLE programs the accounts fall under.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 24-03

Original ruling text

Policy and Research
109 SW 9th Street Phone: 785-368-8222
PO Box 3506 Fax: 785-296-1279
Topeka KS 66601-3506 www.ksrevenue.gov
Mark A. Burghart, Secretary Laura Kelly, Governor

                                        NOTICE 24-03

            CONTRIBUTIONS TO CERTAIN EDUCATION SAVINGS ACCOUNTS OR
              ACHIEVING A BETTER LIFE EXPERIENCE (ABLE) ACCOUNTS

                                        (JUNE 5, 2024)

   During the 2024 Legislative Session Senate Bill 360 was passed and signed into law. Section

2 of the Bill amended K.S.A. 79-32,117, to make changes to the income tax modification for
contributions to certain education savings accounts and for contributions to an achieving a better
life experience (ABLE) account.

  In accordance with K.S.A. 79-32,117, certain addition and subtraction modifications are

made to a taxpayer's federal adjusted gross income to determine the taxpayer's Kansas adjusted
gross income. Subsection (c)(xv) permits a subtraction modification for contributions to certain
education savings accounts, or to an achieving a better life experience (ABLE) account. The
annual contribution amount for each designated beneficiary is capped at $3,000 for an individual,
and at $6,000 for a married couple filing jointly.

  Prior to amendment, the amount of the contribution could be claimed as a subtraction

modification only for the tax year in which the contribution was made. The amended language
expands this period for all tax years beginning after December 31, 2022. The subsection, with the
new language, provides:

         (c)(xv) The cumulative amounts not exceeding $3,000, or $6,000 for a married
   couple filing a joint return, for each designated beneficiary that are contributed to: (1)
   A family postsecondary education savings account established under the Kansas
   postsecondary education savings program or a qualified tuition program established
   and maintained by another state or agency or instrumentality thereof pursuant to section
   529 of the internal revenue code of 1986, as amended, for the purpose of paying the
   qualified higher education expenses of a designated beneficiary; or (2) an achieving a
   better life experience (ABLE) account established under the Kansas ABLE savings
   program or a qualified ABLE program established and maintained by another state or
   agency or instrumentality thereof pursuant to section 529A of the internal revenue code
   of 1986, as amended, for the purpose of saving private funds to support an individual
   with a disability. The terms and phrases used in this paragraph shall have the meaning
   respectively ascribed thereto by the provisions of K.S.A. 75-643 and 75-652, and
   amendments thereto, and the provisions of such sections are hereby incorporated by
   reference for all purposes thereof. For all taxable years beginning after December 31,
   2022, contributions made to a qualified tuition program account or a qualified ABLE
   program account pursuant to this paragraph on and after January 1 but prior to the
   date required for filing a return pursuant to K.S.A. 79-3221, and amendments thereto,
   of the successive taxable year may be elected by the taxpayer to apply to the prior

  taxable year if such election is made at the time of filing the return. No contribution
  shall be used as a modification pursuant to this paragraph in more than one taxable
  year.

  In accordance with prior law, taxpayers who contributed to a qualified tuition program

account, as defined in subsection (xv), or to a qualified ABLE program account, as defined in
subsection (xv) during tax year 2023 may claim a subtraction modification for the contribution on
their 2023 Kansas income tax return. In accordance with the new language, a taxpayer who
contributed to a qualified tuition program account or a qualified ABLE program account during
tax year 2024, but prior to the date required for filing their tax year 2023 return, may claim a
subtraction modification for the contribution on either their tax year 2023 return or their tax year
2024 return. In subsequent years, taxpayers making contributions to a qualified tuition program
account, or a qualified ABLE program account, have the option of claiming a subtraction
modification for the contribution in either: (1) the tax year of the contribution, or (2) the prior tax
year if the contribution is made prior to the date required for filing their tax return for the prior tax
year. For purposes of these provisions, the date required for filing a tax return is April 15th, and
extensions of time to file are not recognized.

  It should be noted K.S.A 79-32,117(b)(x) requires an addition modification for nonqualified

withdrawals from a post-secondary education savings account if such amounts were subtracted
from federal adjusted gross income pursuant to K.S.A. 79-32,117(x)(v) or if such amounts are not
already included in the federal adjusted gross income. The law does not include an addition
modification for withdrawals from an ABLE program account.

                                   TAXPAYER ASSISTANCE

 Additional copies of this notice, forms or publications are available from our web site,

www.ksrevenue.gov. If you have questions about this Notice, please contact:

                                Taxpayer Assistance Center
                               Kansas Department of Revenue
                               Scott Office Building, 1st Floor
                                      120 SE 10th Ave
                                       P. O. Box 3506
                                  Topeka, KS 66601-3506
                                    Phone: 785-368-8222
                                     Fax: 785-291-3614