Can I deduct contributions to a Kansas adoption savings account on my income tax return?
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This page answers the general question as of 2025. Ezel answers yours, under current Kansas tax law, with citations.
Plain-English summary
Kansas Notice 24-22 explains the Adoption Savings Account Act, created by 2024 House Bill 2465, which amended K.S.A. 79-32,117. The act lets a Kansas taxpayer set aside money in a special savings account to pay the cost of adopting a child and claim a Kansas income tax deduction (a "subtraction modification") for what they contribute.
Accounts may be opened on or after July 1, 2025. Each account has an "account holder" and one "designated beneficiary" (the prospective adoptive parent -- you may name yourself). Contributions are limited to $6,000 a year for an individual and $12,000 for a married couple filing jointly, with a total contribution cap of $48,000 (individual) or $96,000 (joint) and a maximum account balance of $100,000. If the balance grows past those limits, the interest earned on the excess becomes subject to Kansas income tax.
Money in the account must be used for "eligible expenses" of the beneficiary's adoption -- reasonable legal and licensed child-placing-agency fees, expenses incidental to the adoption proceeding, the mother's pregnancy and birth medical expenses, the child's medical expenses, and the mother's reasonable living expenses during the pregnancy. Funds may also be moved to a new account, invested in certificates of deposit designated as adoption savings accounts, or used to pay the financial institution's service fees.
The deduction and the recapture rules take effect for tax years beginning after December 31, 2024.
What this means for you
Kansas families planning an adoption
- You can deduct up to $6,000 ($12,000 if married filing jointly) of what you contribute each year on your Kansas return.
- Keep the money in the account and use it only for eligible adoption expenses. If you withdraw it for another purpose, or withdraw it less than a year after the first deposit, the amount is recaptured into your Kansas adjusted gross income and you owe a penalty -- 5% if the withdrawal is within 10 years of the first deposit, 10% after that.
- Keep records. The account holder must maintain documentation for the account and its eligible expenses, and file the forms the Secretary of Revenue prescribes -- along with the account's Form 1099 -- with the Kansas return each year.
- The penalty does not apply if funds are withdrawn after the designated beneficiary dies (and you do not name a new beneficiary that year), or after the account holder's death with no surviving payable-on-death beneficiary. In those death situations the funds are still recaptured into income, but no penalty is charged.
Adopting parents claiming the credit too
This deduction is separate from the Kansas adoption tax credit. The same House Bill 2465 also changed that credit; see Notice 24-20, Adoption Credits, for how the credit works for tax year 2024 and later.
Common questions
When can I open an account? On or after July 1, 2025.
How much can I deduct? Up to $6,000 a year for an individual, or $12,000 for a married couple filing jointly, effective for tax years beginning after December 31, 2024.
Is there a lifetime limit? Yes. Total contributions cannot exceed $48,000 for an individual or $96,000 for a joint filer, and the account cannot hold more than $100,000. Interest earned on amounts over those limits is taxable.
What if I use the money for something other than an adoption? The withdrawn amount is added back to your Kansas adjusted gross income (recapture), and a penalty applies -- 5% within 10 years of the first deposit, 10% after.
Who can be the beneficiary? An account holder names one designated beneficiary and may name themselves. The same person can be the beneficiary of separate accounts held by different account holders, but one account holder cannot name the same beneficiary on multiple accounts (except when opening certificates of deposit).
Citations and references
- House Bill 2465 (2024) -- created the Adoption Savings Account Act and amended the income tax modification and adoption credit statutes.
- K.S.A. 79-32,117 -- Kansas addition and subtraction modifications to federal adjusted gross income; amended to add the adoption savings account subtraction (new subsection (c)(xxx)) and the recapture addition (new subsection (b)(xxix)).
- K.S.A. 79-32,117(b) -- addition modifications, including recapture of improperly used account funds.
- K.S.A. 79-32,117(c) -- subtraction modifications, including the contribution deduction.
- K.S.A. 79-32,202a -- the Kansas adoption tax credit, amended by the same bill (see Notice 24-20).
Source
- Landing page: Kansas Department of Revenue Policy Information Library
- Original document: Notice 24-22
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 24-22
ADOPTION SAVINGS ACCOUNT ACT
(JANUARY 16, 2025)
During the 2024 Legislative Session House Bill 2465 was passed and signed into law. The
Bill establishes the Adoption Savings Account Act and amends K.S.A. 79-32,117 which relates to
income tax modifications.
New Section 1 provides sections 1 through 7 are known and may be cited as the adoption
savings account act.
Definitions
New Section 2 provides definitions for the terms "adoption savings account", "account
holder", "designated beneficiary", "eligible expenses", and "financial institution". Subsections
(b), (c), (d), (e), and (f) provide:
(b) "Account" or "adoption savings account" means an individual savings
account established in accordance with the provisions of this act.
(c) "Account holder" means an individual who establishes an account that is
designated as an adoption savings account pursuant to the provisions of section 3, and
amendments thereto, with a financial institution.
(d) "Designated beneficiary" means the individual designated by an account
holder pursuant to the provisions of section 3, and amendments thereto, as the
individual whose eligible expenses are expected to be paid from the account for the
adoption of a child.
(e) "Eligible expenses" means:
(1) Reasonable fees for legal and other professional services rendered in
connection with an adoption or placement for adoption not to exceed customary fees
for similar services by professionals of equivalent experience and reputation where the
services are performed;
(2) reasonable fees of a licensed child-placing agency;
(3) actual and necessary expenses incidental to the adoption or placement
proceeding;
(4) actual medical expenses of the mother attributable to pregnancy and birth;
(5) actual medical expenses of the child; and
(6) reasonable living expenses of the mother that are incurred during or as a
result of the pregnancy.
(f) "Financial institution" means any state or federally chartered bank, trust
company, savings and loan association or credit union that is:
(1) Authorized to do business in this state; and
(2) insured by the federal deposit insurance corporation or the national credit
union administration.
Opening Account and Qualification for Modification
New Section 3(a) relates to the opening of an adoption savings account. It provides adoption
savings accounts may be opened on and after July 1, 2025, and describes who may be an account
owner. It also provides a taxpayer who complies with the requirements of the act may claim a new
income tax subtraction modification allowed by K.S.A. 79-32,117, as amended.
Designation of Account Beneficiary
New Section 3(b) relates to the designation of a prospective adoptive parent as the designated
beneficiary of the account. It provides an account holder may name themselves as the designated
beneficiary of an account, and that the account holder may change the name of the designated
beneficiary, but there may be only one designated beneficiary on an account. An individual may
be designated as the designated beneficiary of more than one account if such accounts are held by
separate account holders. No account holder is authorized to designate the same designated
beneficiary on multiple accounts held by such account owner, except when opening certificates of
deposit.
Contributions to Account and Payment of Expenses
New Section 3(c)(1) establishes limits on the amount of contribution to an account. It
provides the maximum contribution in any tax year at $6,000 for an individual, and $12,000 for a
married couple filing a joint return. The maximum amount of all contributions into an account in
all tax years is $48,000 for an individual and $96,000 for a married couple filing a joint return.
And, the maximum total amount in an account is limited to $100,000. New Section (3)(c)(2)
provides that if a limit set by (c)(1) is exceeded, all interest or other income earned by the
investment of moneys in the account after the limit is exceeded will be subject to Kansas income
tax. New Section (3)(c)(3) provides moneys may remain in an account for an unlimited amount
of time without the interest or income being subject to recapture or penalty.
New Section 3(d) provides the account holder cannot use moneys in the account to pay
expenses of administering the account, except for a service fee assessed by a financial institution.
In addition, the account holder is responsible for maintaining documentation for the account and
for eligible expenses related to the designated beneficiary's adoption of a child.
Use of Funds
New Section 4(a) delineates the purposes for which moneys in an adoption savings account
may be used. This includes: (1) Used for eligible expenses related to a designated beneficiary's
adoption of a child; (2) used for eligible expenses that would have qualified but the adoption was
not completed; (3) transferred to another newly created account; (4) invested in certificates of
deposit opened and designated as adoption savings accounts; and (5) used to pay service fees
assessed by the financial institution.
Recapture of Funds for Tax Purposes
New Section 4(b) addresses the recapture of moneys withdrawn from an account if the
moneys were not withdrawn properly or for an approved purpose. It provides moneys withdrawn
from an account are subject to recapture (i.e. subject to Kansas income tax) in the tax year they
were withdrawn if: (1) At the time of withdrawal, it has been less than a year since the first deposit
in the account; or (2) the moneys are used for any purpose other than the expenses or transactions
authorized pursuant to subsection (a)(1) of New Section 4.
New Section 4(c) delineates the amount of moneys subject to recapture. It provides moneys
that are subject to recapture is an amount equal to the moneys withdrawn from an account, and
that this amount is to be added to the account holder's Kansas adjusted gross income pursuant to
K.S.A. 79-32,117(b), or, if the account holder is no longer living, to the designated beneficiary's
Kansas adjusted gross income. If any moneys are subject to recapture, the account holder shall
pay a penalty in the following amounts: (1) If the withdrawal of moneys occurred 10 or less years
after the first deposit in the account, 5% of the amount subject to recapture; and (2) if the
withdrawal of moneys occurred more than 10 years after the first deposit in the account, 10% of
the amount subject to recapture.
New Section 4(d) limits the penalties provided in 4(c). In accordance with this provision,
the penalties provided in 4(c) do not apply if the moneys are withdrawn from an account after the
death of the designated beneficiary, and the account holder did not designate a new designated
beneficiary during the same tax year.
New Section 4(e) addresses both recapture and the abatement of penalties in the event of the
death of an account holder. It provides that if the account holder dies or, if the account is jointly
owned and the account owners die, and the account does not have a surviving payable on death
beneficiary, then all of the moneys in the account resulting from contributions or income earned
from assets in the account are subject to recapture in the tax year of the death or deaths pursuant
to K.S.A. 79-32,117, but no penalty shall be assessed pursuant to subsection (c). The recaptured
moneys in the account will be reported on the owner or owner's year of death income tax return.
Reporting Requirements
New Section 5 relates to reporting requirements at the time of filing the account holder's
income tax return. It requires the Secretary of Revenue to establish forms for an account holder
to annually report information about any accounts held by such account holder. And it provides
the account holder to annually file, with the account holder's state income tax return, all forms
required by the secretary under this section, the form 1099 for the account issued by the financial
institution, and any other supporting documentation the secretary requires.
Financial Institution Responsibilities and Marketing of Accounts
New Section 6 relates to financial institution responsibilities. New Section 7 relates to
marketing of the adoption savings account program by the State Treasurer.
Modifications
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.
Section 9 amends K.S.A. 79-32,117(b) to add new subsection (xxix), which requires an
addition modification for improper use of funds in an adoption savings account. Effective for all
taxable years beginning after December 31, 2024, the recapture provision requires the addition of
the amount of any contributions to, or earnings from, an adoption savings account if distributions
from the account were not used to pay for expenses or transactions authorized pursuant to New
Section 4, or were not held for the minimum length of time required pursuant to New Section 4.
Contributions to, or earnings from, the account also include any amount resulting from the account
holder not designating a surviving payable on death beneficiary pursuant to New Section 4(e).
Section 9 also amends K.S.A. 79-32,117(c) to add new subsection (xxx), which allows a
subtraction modification for the amount contributed to an adoption savings account. Effective for
all taxable years beginning after December 31, 2024, it allows a subtraction modification for (1)
an amount not to exceed $6,000 for an individual or $12,000 for a married couple filing a joint
return, or (2) amounts received as income earned from assets in an adoption savings account.
Adoption Credit
Section 10 amends K.S.A. 79-32,202a, which provides an adoption credit. For additional
information about the credit, see Notice 24-20 Adoption Credit which is available through the
Department's website at:www.ksrevenue.gov.
Effective Date
Unless otherwise noted, the provisions of the Bill are effective July 1, 2024.
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
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