How much credit does Kansas give a resident for income taxes paid to another state?

Plain-English summary

A Kansas resident asked how to compute the credit for income taxes paid to another state. The Department rescinded an earlier position and ruled that the credit is limited to the net tax the taxpayer actually paid the other state.

This ruling replaces a prior one. "The purpose of this letter is to rescind the position expressed to you in my letter dated November 19, 1997, regarding the credit for 'taxes paid to another state' herein referred to as 'Credit.'"

The credit. "Kansas law provides for a credit for taxes paid to another state in the 'amount of income tax paid to another state by a resident individual, resident estate or resident trust on income derived from sources in another state shall be allowed as a credit against the tax computed under the provisions of this act.'"

The limit — net tax actually paid. "The department has determined that the operation of this statute is for the Credit to be limited to net amount of taxes actually paid to the other state. The Credit allowed is the net of the taxpayer's tax liability less any nonrefundable or refundable tax credits allowed by the other state."

What this means for you

Residents with income taxed by another state

Kansas gives you a credit for tax paid to another state on income sourced there, but only for what you actually, net, paid. Start from the other state's tax liability and subtract any credits that state gave you — refundable or nonrefundable — before figuring your Kansas credit.

Another state's credits reduce your Kansas credit

If the other state's own tax credits reduced or eliminated your bill there, your Kansas credit shrinks to match. You cannot get a Kansas credit for out-of-state tax you did not ultimately bear.

This was a change in position

The Department expressly rescinded its November 1997 letter to this taxpayer. That is a reminder that the Department can revisit and change earlier guidance — and that a private letter ruling binds only the taxpayer it was issued to.

Common questions

Q: What is the Kansas credit for taxes paid to another state?
A: A credit for the income tax a resident individual, estate, or trust pays to another state on income derived from sources in that other state, applied against the Kansas tax.

Q: Is the credit the full tax the other state charged?
A: No. It is limited to the net amount of tax actually paid — the other state's liability less any nonrefundable or refundable credits that state allowed.

Q: Why does the ruling mention rescinding a 1997 letter?
A: The Department was withdrawing the different position it had given this taxpayer in 1997 and replacing it with the net-tax-actually-paid rule stated here.

Citations and references

• The Department quoted the Kansas statute allowing a resident a credit for income tax paid to another state on out-of-state-source income, but did not cite it by section number. It construed that statute to limit the credit to the net tax actually paid the other state (its liability less any refundable or nonrefundable credits it allows). This ruling rescinds the Department's November 19, 1997 letter to the taxpayer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-02

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

January 8, 1999

XXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX
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Dear XXXXXXXXXX:

The purpose of this letter is to rescind the position expressed to you in my letter dated November 19, 1997, regarding the credit for “taxes paid to another state” herein referred to as “Credit.”

Kansas law provides for a credit for taxes paid to another state in the “amount of income tax paid to another state by a resident individual, resident estate or resident trust on income derived from sources in another state shall be allowed as a credit against the tax computed under the provisions of this act.”

The department has determined that the operation of this statute is for the Credit to be limited to net amount of taxes actually paid to the other state. The Credit allowed is the net of the taxpayer’s tax liability less any nonrefundable or refundable tax credits allowed by the other state.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely yours,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 01/12/1999 Date Modified: 10/10/2001

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