How to Make a Kansas PTET Election: The SALT Parity Act, Form K-120S, and the 5.58% Rate

An Overland Park consulting firm runs as an S corporation and clears about $400,000 of Kansas profit after paying its owner a reasonable salary. The owner itemizes, and between property tax on the house and the Kansas income tax withheld on her wages, she has used up the available federal SALT deduction before the business income even reaches her return. Every dollar of Kansas tax she pays on that $400,000 is, federally, a dollar she cannot deduct. The SALT Parity Act is built for exactly that problem. This owner is theoretical, but the mechanics are the ones I walk Kansas owners through every winter.

What checking Box N actually does

Kansas's SALT Parity Act, enacted by House Bill 2239 in 2022 and codified at K.S.A. 79-32,287, lets an S corporation or a partnership pay Kansas income tax at the entity level. The rate is tied to the top individual rate under K.S.A. 79-32,110(a), which is 5.58% for 2024 and later years. It was a flat 5.7% for 2022 and 2023. Because the entity pays at the top rate, a high-income owner sees the entity tax and the individual tax land in nearly the same place, so the election does not create a Kansas tax cut. Its value is federal.

Here is the part most write-ups skip. Kansas business income is taxed at about the same rate whether you pay it yourself or the entity pays the 5.58% on Form K-120S. Under IRS Notice 2020-75, the entity-level tax is deductible by the entity as a business expense and is not subject to the federal SALT cap, so the election moves that 5.58% from a capped itemized deduction to a fully deductible business expense. The federal deduction is the entire point. A few owners talk themselves into the election expecting a Kansas tax cut that is not there, so be clear about the trade before you file.

Who can elect, and the one rate that matters

Any Kansas S corporation or partnership, including a multi-member LLC taxed as a partnership, can make the election. A single-member LLC taxed as a disregarded entity has nothing to elect, since it files on the owner's return rather than its own. The electing entity is treated as a C corporation for estimated-tax purposes, so if the entity-level tax for the year is expected to be large, it pays quarterly estimates on Form K-120ES rather than one lump sum with the return.

The 5.58% is the number to watch. Kansas taxes individuals on two brackets: 5.2% on taxable income up to $23,000 for a single filer, or $46,000 for a married couple filing jointly, and 5.58% above those amounts. Almost all of a profitable owner's business income already sits in that top bracket, so the entity rate and the owner's marginal rate are close to identical for anyone with real profit. For a smaller operator whose income still falls in the 5.2% bracket, the entity pays the flat 5.58% on income the owner would have taxed at 5.2%, so the election can run a touch higher than paying the tax personally. That gap is small, but it is a reason to run your own numbers rather than assume a clean wash.

How to make the election: Box N, the K-120S, and the deadline

You make the election by checking Box N on a timely filed Form K-120S, the Kansas Partnership or S Corporation return, for each year you want it in effect. The election is annual, so electing for one year does not commit you to the next, and once the return is filed with the box checked the election is binding on every owner for that tax year. The entity reports and pays the tax on the same K-120S, due the fifteenth day of the fourth month after the tax year closes, which is April 15 for a calendar-year entity.

A federal Form 7004 extension gives the K-120S an automatic six-month extension to file, but it does not push the payment date, so the tax still has to be in by the original deadline to avoid interest. The rate change from 5.7% to the top individual rate took effect through the Kansas Department of Revenue's Notice 24-15, and the current 5.58% figure is the one the 2025 K-120S instructions use. If you are reading older software prompts or articles that still show 5.7%, they have not caught up.

How owners claim the credit, with a theoretical S corp

Each owner receives a Form K-9 from the entity showing their share of the Kansas tax it paid, and claims a credit for that amount against their Kansas individual income tax. The owner still reports their share of the entity's income on their Kansas return, then offsets the Kansas tax on it with the credit, so the income is taxed once, at the entity level. An owner who wants the credit has to file a Kansas return to claim it.

Take that Overland Park S corporation with $400,000 of Kansas business income after a reasonable salary, a single resident owner in the 32% federal bracket who has already filled her SALT allowance with property and wage-withholding taxes. The Kansas tax is about $22,320 either way. The only question is whether that $22,320 is deductible on the federal return. The numbers below are 2026 figures, rounded, and the business is theoretical.

The $7,142 is the federal tax saved on a $22,320 business deduction at a 32% rate. There is a catch worth naming. The entity-level tax reduces the qualified business income that flows to the owner, so the IRC §199A deduction drops by 20% of $22,320, or about $4,464, which costs roughly $1,428 of federal tax back. Net, the owner keeps about $5,700. Most online summaries leave that §199A trim out. For a specified service business already phased out of §199A, there is no trim and the full $7,142 stands.

When the Kansas election is not worth it

The 2025 federal tax law raised the SALT cap to $40,400 for 2026, up from the old $10,000, and it only phases down above $505,000 of modified adjusted gross income. A good number of Kansas owners can now deduct their state income tax personally without any election, which shrinks or erases the benefit. Before you check Box N, add up your property tax and your personal state income tax and see whether you are actually over the cap. If you are comfortably under it, the election buys you little. I walk through that threshold in detail in the $40,000 SALT cap guide, and the broader mechanics live in the PTET SALT cap workaround explainer.

Two more cautions. A nonresident owner should check how their home state credits the Kansas entity tax, since a few states are stingy about crediting tax paid by the entity rather than the individual. And because the election lives on the return as a single box, a missed Box N on a timely filed K-120S is a missed election for the year, with no separate form to fall back on. If you are still deciding whether an S corporation makes sense at all, start with the federal payroll-tax question using the EntityIQ S-Corp tax calculator, then layer the state election on top once the entity is profitable.

This article is educational and is not legal or tax advice. The figures are 2026 amounts, the business is theoretical, and Kansas adjusts its forms and procedures often. Please confirm the current rules with the Kansas Department of Revenue and a qualified CPA before filing.