Starting from tax year 2022 and onwards, the state of Kansas has raised the R&D tax credit percentage from 6.5% to 10% of a taxpayer’s qualifying R&D expenses. These expenses must comply with the guidelines outlined in Section 41 of the Internal Revenue Code for research and development purposes.
In order to take advantage of the R&D Tax Credit in Kansas, you must fill out Schedule K-53 and include it when submitting your income tax return. Starting from the 2023 tax year, the credit can be transferred to another person who can use it to offset their Kansas income tax liability for the year it was transferred. It’s important to note that the credit can only be transferred once and in its entirety, and no refund will be granted for any unused portion of the credit.
Corporations that are subject to Kansas corporate income tax, such as C corporations, can take advantage of the Kansas Research and Development Tax Credit. Unfortunately, individuals, partnerships, S corporations, limited liability companies (LLCs), and other pass-through entities are not eligible for the Kansas R&D credit.
Kansas Research and Development Tax Credit is a state-level tax incentive designed to encourage companies to invest in R&D activities within the state. The recent changes to Kansas R&D legislation have raised the credit rate from 6.5% to a substantial 10%. The maximum credit that can be claimed in a single tax year is equal to 25% of the credit amount plus any unused credit from previous years that has been carried forward. Even taxpayers without a tax obligation can take advantage of the credit by transferring it to another taxpayer, although this transfer can only happen once and must be for the full amount of the credit.
In Kansas, the R&D tax credit that can be claimed in a single tax year is capped at 25% of the credit amount, along with any amount carried forward from previous years. Any unused portion of the credit can be carried forward in increments of 25% until the full amount is utilized.
Wages paid to employees who are directly involved in the performance of research and development activities within the state of Kansas. This includes payments made to subcontractors involved in the performance of such activities.
Most states offer R&D tax credits as well with many of them being more lucrative than the federal credit. At Source Advisors, we can help assess your company’s federal R&D tax credit opportunity and also determine any state R&D tax credit availability. Our team of experienced CPAs, attorneys, engineers, and technology experts helps companies save money and create cash flow with R&D tax credits that can then help drive overall growth.