Kansas taxpayers could save for insurance costs with tax subtractions

Individuals and corporations could open insurance savings accounts and claim Kansas income tax subtractions for qualifying contributions and earnings. An individual or corporation could hold one or more accounts at an eligible financial institution. Individuals who file a joint income tax return could own an account together. Individuals could subtract contributions up to $6,000, or $12,000 for married couples filing jointly; corporations could subtract contributions up to $25,000. Account earnings could also be subtracted, except earnings from contributions above the applicable limit. Account holders must follow the act's rules to qualify. Accounts could be opened starting January 1, 2027. The tax subtractions would apply to tax years beginning after December 31, 2026.

Account holders would add certain withdrawals to Kansas income when account money is used for an unapproved purpose. The withdrawal rules cover individual and corporate account holders. Eligible expenses are premiums and deductibles for the types of insurance named by reference in the bill. Approved uses include insurance premiums and deductibles for the specified types of insurance, transfers to another newly created account, designated certificates of deposit, and financial institution service fees. For individual accounts, money would also be subject to tax recapture if the holder dies, or all joint owners die, without a surviving payable-on-death beneficiary. The income addition would apply to tax years beginning after December 31, 2026. Recapture would apply in the tax year of the withdrawal or, for the specified death circumstance, the tax year of death.

Account holders would report their accounts and related information to the secretary of revenue each year. The reporting duty would apply to any individual or corporation holding an account. Account holders would file required forms, the account's financial institution tax form, and any other documents the secretary requires with their Kansas income tax return. Financial institutions would not have to designate or track these accounts, report information not otherwise required by law, or check whether account holders qualify for tax subtractions. Account holders would report annually with their state income tax returns; the bill does not give a separate start date for this duty.