How does Kansas tax money converted from a traditional deductible IRA to a Roth IRA?

Plain-English summary

The Department was asked how Kansas taxes money converted from a traditional deductible IRA into the new Roth IRA. The short version: Kansas simply follows the federal treatment — a 1998 conversion is spread over four years, and this flows automatically from Kansas conforming to the federal definition of adjusted gross income.

The Department's answer:

• Kansas conforms to the federal conversion rule. "Kansas will conform to the federal treatment of IRA conversions to the new 'Roth IRA'. In tax year 1998, any conversions will be spread over a four year period. Transfers beginning in tax year 1999, will be fully taxable in the year converted."
• The conformity is automatic through federal AGI. "Kansas currently conforms to the definition of federal adjusted gross income. Any changes made by the federal government in the computation of federal adjusted gross income is automatically conformed to by Kansas. The treatment of IRA conversions to the new 'Roth IRA' is automatic in Kansas."

Because Kansas starts its individual income tax calculation from federal adjusted gross income, whatever amount of the conversion the federal rules include in a given year is the amount Kansas includes that year — no separate Kansas election or schedule is needed.

What this means for you

Individuals who converted in 1998

The taxable amount of your 1998 traditional-to-Roth conversion is spread over four years for Kansas, mirroring the federal transition rule. You report the federally includible portion each year, and Kansas taxes that same portion.

Conversions in 1999 and later

Conversions made beginning in tax year 1999 are fully taxable in the year of the conversion — the four-year spread was a one-time feature of the 1998 transition.

Why you don't need a separate Kansas calculation

Kansas begins from federal adjusted gross income and automatically conforms to federal changes in how that figure is computed. So the federal treatment of your Roth conversion carries into your Kansas return without any special Kansas adjustment.

Common questions

Q: How does Kansas tax a 1998 conversion to a Roth IRA?
A: The same way the federal rules do — the income is spread over a four-year period.

Q: What about a conversion made in 1999 or later?
A: It is fully taxable in the year converted; the four-year spread applied only to 1998 conversions.

Q: Do I need to do a separate Kansas calculation?
A: No. Kansas conforms to the federal definition of adjusted gross income and automatically picks up the federal treatment of the conversion.

Citations and references

• Conformity to federal adjusted gross income — Kansas starts from federal adjusted gross income and automatically conforms to federal changes in how it is computed, so the federal treatment of a Roth IRA conversion (a four-year spread for 1998, fully taxable in the year converted from 1999 on) carries over automatically. (The Department cited no K.S.A. section in this letter.)

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-1998-05

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

September 3, 1998

XXXXXXX
XXXXXXX
XXXXXXX

Dear Mr. XXX:

Thank you for your letter regarding the taxation of Roth IRA retirement income in Kansas. In your letter you ask how the state of Kansas will treat money that is converted from a traditional deductible IRA to a Roth IRA in 1998?

Kansas will conform to the federal treatment of IRA conversions to the new “Roth IRA”. In tax year 1998, any conversions will be spread over a four year period. Transfers beginning in tax year 1999, will be fully taxable in the year converted.

Kansas currently conforms to the definition of federal adjusted gross income. Any changes made by the federal government in the computation of federal adjusted gross income is automatically conformed to by Kansas. The treatment of IRA conversions to the new “Roth IRA” is automatic in Kansas.

If you have any further questions please let me know.

Sincerely,

Date Composed: 09/08/1998 Date Modified: 10/10/2001

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