Mortgage interest rate change to take effect
By RUTH CAMPBELL
By RUTH CAMPBELL
The state's mortgage interest rate deduction, poised for elimination back in March, survived the legislative session but with modifications.
The Kansas Association of Realtors proposed a compromise, which was adopted, but moved up in terms of schedule. Luke Bell, Kansas Association of Realtors vice president of governmental affairs in Topeka, said the deduction will be 70 percent for 2013 and continue downward until 2017, when it is supposed to stay at 50 percent.
The deduction is part of an overall tax bill, House Bill 2059, which includes expanded Rural Opportunity Zones, restoration of the food sales tax rebate program and reduces sales tax, that takes effect Monday.
Revenue the mortgage interest rate deduction modification would bring in is not broken out, said Jeannine Koranda, Kansas Department of Revenue public information officer.
This year, homeowners will be able to claim 70 percent of itemized deductions. That will go to 65 percent in 2014, 60 percent in 2015, 55 percent in 2016 and 50 percent in 2017.
"And it will stay permanently at 50 percent unless the Legislature modifies it," Bell said.
Taxpayers still will be able to claim 100 percent of charitable donations, but the new law also does away with certain gambling loss deductions. "You'll still be able to claim (under) federal law, but you'll no longer be able to claim it on your state return," Bell said.
Bell said the mortgage interest rate deduction should be offset by the income tax deductions in the law.
A new series of individual income tax rate cuts in 2014 will reduce the current bottom bracket of 3 percent to 2.7 percent and the current top bracket of 4.9 percent to 4.8 percent, according to material from the Kansas Legislative Research Department.
In 2015, the top bracket will be dropped to 4.6 percent. The two rate brackets are set at 2.4 percent and 4.6 percent in 2016; 2.3 percent and 4.6 percent in 2017; and 2.3 and 3.9 percent in 2018.
According to Kansas Legislative Research Department material, the tax bill, which includes the mortgage interest rate deduction, is predicted to bring more than $1.1 billion into state coffers over the next five years. Koranda said $114.6 million is projected for fiscal year 2014.
The bill adheres "roughly" to what the Kansas Association of Realtors proposed and was "significantly better" than Gov. Sam Brownback's original proposal, Bell said.
"The reason we did that was to balance things out. We did not take a final position on the tax bill, but we did not oppose it," he said.
Bell said he didn't think the legislation would have a significant impact on those purchasing homes, because the federal deduction is much higher. Overall, he said, the average homeowner who takes a mortgage interest deduction will see a net deduction in their tax liability.
Kansas standard reduction levels for married taxpayers filing jointly and for single heads-of-household are reduced to $7,500 for married taxpayers and $5,500 for single heads-of-household, starting in tax year 2013.
Rural Opportunity Zones now include 50 counties that have been authorized to offer financial incentives to new full-time residents. Those include Kansas income tax waivers for up to five years and student loan repayments up to $15,000. Counties added in southwest Kansas are Grant, Gray, Haskell, Meade and Stevens.
The full bill is available at http://www.kslegislature.org/li/b2013_14/measures/hb2059/.