As you are probably aware, especially if you live in Kansas and own your own business or are otherwise self-employed, many of us will facing a whopping Kansas income tax bill next April due to the changes in Kansas tax law enacted last summer. The income tax exemption (commonly referred to as the LLC exemption) that many businesses and self-employed individuals have enjoyed for the past five years has been eliminated. The effective date of this legislation is January 1st, 2017 - a retroactive tax increase!
Depending upon the amount of your 2017 income, this could mean an extra $15,000 or more added to your tax bill. Since state and local income taxes are deductible on the federal return (at lease as of this writing - the most recent version of Trump's tax bill includes elimination of this deduction), you may want to prepay this liability this year to reduce your 2017 federal taxes.
Before adopting this strategy, keep the following caveats in mind. First, this strategy works only if you are otherwise already itemizing your deductions instead of using the standard deduction. Secondly, if you are subject to the alternative minimum tax (which does not allow for the deduction of state and local taxes), this strategy is of little or no use. Finally, if your taxable income is high enough that you are subject to the overall phase-out of itemized deductions (starting at $261,500 on a 2017 joint return), this strategy may not appropriate.
President Trump is calling for a new tax bill by Christmas, so I would not recommend paying your 2017 Kansas income tax bill any time before then. To nail down this deduction, you only need to have postmarked your check by December 31st. Please let me know if I can be of assistance on this or any other year-end tax planning concerns you might have.
