KS Notice 26-08 Kansas Income Tax 2026-07-01

Does Kansas give an income tax subtraction for portable benefit plan contributions for independent contractors?

Short answer: Yes, beginning with tax years after December 31, 2026. Kansas Notice 26-08 explains 2026 House Bill 2602, which defines a "portable benefit plan" for independent contractors and amended K.S.A. 79-32,117 to add income tax subtraction modifications. A portable benefit plan is a benefit plan administered by a third party the independent contractor chooses (not by a hiring party) and assigned to a beneficiary; the plan provider must offer at least one of health insurance, income replacement insurance, disability insurance, life insurance, or retirement benefits. A hiring party may fund the contractor's portable benefit account using the contractor's funds, the hiring party's funds, or a percentage withheld from the contractor's pay, and making contributions cannot be used to decide the worker's employment classification. Two new subtraction modifications apply for tax years beginning after December 31, 2026: one lets a hiring party taxpayer subtract the amount it contributed to a portable benefit plan (to the extent not already deducted federally), and the other lets an independent contractor taxpayer subtract amounts contributed on their behalf to the extent those amounts are included in the contractor's federal adjusted gross income. (These modifications, first numbered (c)(xxxi) and (c)(xxxii), were renumbered to (c)(xxxii) and (c)(xxxiii) after reconciliation by 2026 Senate Bill 300.) The law is effective July 1, 2026.

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This page answers the general question as of 2026. Ezel answers yours, under current Kansas tax law, with citations.

Disclaimer: This is an official Kansas Department of Revenue Notice: public guidance the Department issues to explain Kansas tax law, most often a newly enacted statute. It states the Department's general interpretation and administration of the law; it does not have the force of law and is not a private ruling issued to any one taxpayer. It reflects the statutes, regulations, and rates in effect on its issue date and may since have been amended or superseded by a later notice or law change, so confirm it is still current before relying on it. Kansas state and local sales and use taxes are administered centrally by the Department, so there is no self-collected home-rule city tax outside its scope. This summary is informational only and is not legal or tax advice.

About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.

View original ruling (PDF)

Plain-English summary

2026 House Bill 2602 created a Kansas framework for portable benefit plans for independent contractors and amended K.S.A. 79-32,117 to add new income tax subtraction modifications, effective for tax years beginning after December 31, 2026.

What a "portable benefit plan" is (New Section 1(a)–(b)): a benefit plan administered by a third party the independent contractor chooses and assigned to a beneficiary — it does not include a plan administered by a hiring party. The portable benefit plan provider (the account's administrator — a bank, investment management firm, technology provider or program manager operating through one of those, or a credit union) must provide at least one of: health insurance, income replacement insurance, disability insurance, life insurance, or retirement benefits.

How it can be funded (New Section 1(c)–(d)): a hiring party may contribute to an independent contractor's portable benefit account using the contractor's funds, the hiring party's own funds, or a percentage withheld from what the hiring party owes the contractor. Importantly, making (or receiving) these contributions cannot be used as a criterion to decide a worker's employment classification — so it does not, by itself, turn an independent contractor into an employee.

The tax breaks (Section 2, amending K.S.A. 79-32,117(c)): for tax years beginning after December 31, 2026, there are two subtraction modifications from federal adjusted gross income:

A hiring party taxpayer may subtract the amount it contributed to a portable benefit plan (to the extent not already deducted federally or otherwise subtracted).
An independent contractor taxpayer may subtract amounts contributed on their behalf under New Section 1(c)(1) or (2), to the extent those amounts are included in the contractor's federal adjusted gross income.

The notice adds that these were first enumerated as (c)(xxxi) and (c)(xxxii) but were renumbered to (c)(xxxii) and (c)(xxxiii) after reconciliation by 2026 Senate Bill 300. The law is effective July 1, 2026.

What this means for you

Independent contractors / gig workers

Beginning with the 2027 tax year, contributions made on your behalf to a qualifying portable benefit plan can be subtracted on your Kansas return to the extent they were included in your federal AGI — so you are not taxed by Kansas on benefit contributions that federal law counted as your income.
Participating in a portable benefit plan does not change your status — contributions can't be used to reclassify you as an employee.

Businesses that hire independent contractors ("hiring parties")

You can contribute to a contractor's portable benefit account (using the contractor's funds, your own funds, or a withheld percentage) and subtract your contribution on the Kansas return, to the extent it isn't already deducted federally.
The plan must be administered by a third party the contractor chooses, not by you, and must offer at least one qualifying benefit (health, income replacement, disability, life, or retirement).

Tax preparers

Note the renumbering: the modifications end up at (c)(xxxii) (hiring party) and (c)(xxxiii) (independent contractor) after 2026 SB 300 reconciliation — confirm the current statutory citation when preparing returns.

Common questions

Q: When does this start?
A: Tax years beginning after December 31, 2026 (the 2027 tax year). The law is effective July 1, 2026.

Q: Who gets the subtraction?
A: Both sides can — a hiring party for what it contributes, and an independent contractor for contributions included in their federal AGI.

Q: Does contributing make my contractor an employee?
A: No. The notice says contributions to a portable benefit account "shall not be used as a criterion for determining a worker's employment classification."

Q: What is a portable benefit plan provider?
A: The administrator of the portable benefit account — a bank, investment management firm, technology provider or program manager operating through a bank/investment firm, or a credit union.

Citations and references

House Bill 2602 (2026) — defines portable benefit plan terms (New Section 1) and amends K.S.A. 79-32,117 (Section 2); effective July 1, 2026.
New Section 1(a) — definitions, including "portable benefit plan" (third-party administered, chosen by the independent contractor, assigned to a beneficiary; not a hiring-party-administered plan) and "portable benefit plan provider."
New Section 1(b) — the provider must offer at least one of health, income replacement, disability, or life insurance, or retirement benefits.
New Section 1(c) — a hiring party may fund the account with the contractor's funds, the hiring party's funds, or a withheld percentage of the contractor's pay.
New Section 1(d) — contributions may not be used as a criterion for determining a worker's employment classification.
K.S.A. 79-32,117(c), new subtraction modifications (Section 2) — first (c)(xxxi)/(c)(xxxii), renumbered to (c)(xxxii)/(c)(xxxiii) after 2026 Senate Bill 300 reconciliation; hiring-party contribution subtraction and independent-contractor subtraction (to the extent included in federal AGI), for tax years beginning after December 31, 2026.
Effective date: July 1, 2026.

Source

Landing page: Kansas Department of Revenue Policy Information Library
Original document: Notice 26-08

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 26-08

                    INCOME TAX SUBTRACTION MODIFICATION FOR
                   CONTRIBUTIONS TO A PORTABLE BENEFIT PLAN FOR
                            INDEPENDENT CONTRACTORS

                                      (JULY 1, 2026)

   During the 2026 Legislative Session House Bill 2602 was passed and signed into law. The

Bill provides definitions, and amends K.S.A. 79-32,117, to create an income tax subtraction
modification for contributions to a portable benefit plan for independent contractors.

   New Section 1(a) of the Bill defines the terms: (1) "Bank"; (2) "Credit union"; (3) "Hiring

party"; (4) "Independent contractor"; (5) "Portable benefit plan"; and (6) "Portable benefit plan
provider". The term "Portable benefit plan" is defined as a benefit plan that is administered by a
third party chosen by the independent contractor and assigned to a beneficiary. The term does not
include a benefit plan administered by a hiring party. The term "portable benefit plan provider" is
defined as the administrator of a portable benefit account, and may be a bank, investment
management firm, technology provider or program manager that offers services through a bank or
investment management firm or a credit union.

   New Section 1(b) provides the portable benefit plan provider is required to provide at least

one of the following: health insurance, income replacement insurance; disability insurance; life
insurance; or retirement benefits.

   New Section 1(c) provides the hiring party may contribute funds to an independent

contractor's portable benefit account using the funds of the independent contractor, funds of the
hiring party, or a percentage of funds withheld from compensation owed to an independent
contractor.

   New Section 1(d) provides that contributions to a portable benefit account shall not be used

as a criterion for determining a worker's employment classification.

   Section 2 of the bill amends K.S.A. 79-32,117(c) to provide for the tax treatment of funds

contributed to a portable benefit plan.

    New subsection (c)(xxxi) [new subsection (c)(xxxii) after reconciliation made by 2026

Senate Bill 300] amends K.S.A. 79-32,117(c) to provide, for all taxable years beginning after
December 31, 2026, a subtraction modification for the amount contributed to a portable benefit
plan by a hiring party taxpayer through the portable benefit plan account pursuant to New Section
1, to the extent that such contributions are not already deducted on the taxpayer's federal income
tax return for such taxable year when determining the taxpayer's federal adjusted gross income or
are not otherwise subtracted or deducted from the taxpayer's federal adjusted gross income.

 New subsection (c)(xxxii) [new subsection (c)(xxxiii) after reconciliation made by 2026

Senate Bill 300] amends K.S.A. 79-32,117(c) to provide, for all taxable years beginning after
December 31, 2026, a subtraction modification for the amount contributed to a portable benefit
plan pursuant to New Section 1(c)(1) or (2), and amendments thereto, to the extent that such
amount is included in the independent contractor taxpayer's federal adjusted gross income.

 The new law becomes effective July 1, 2026.

                               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
                        Hearing Impaired TTY: 785-296-6461
                                 Fax: 785-291-3614

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