In 2022 the Kansas legislature passed statewide Aviation Tax Credits legislation that benefits newly hired aviation sector employees. This new incentive offers qualifying new hires in the aviation sector up to $5,000 per year as a state income tax credit. Check out the Q&A below to see how you can qualify to get more money in your pocket.
How does the Aviation Tax Credit work?
This $5,000 state income tax credit can be claimed each year through 2026 – totaling up to $25,000 in value for individuals that meet all requirements. If your state tax liability is less than $5,000 in any given year, the remaining tax credit balance can be carried forward and used in any of the following four tax years in which the tax credit was first allowed. For many people, this could mean they do not owe Kansas income tax for up to nine years!
Who can get the tax credit?
This income tax credit is available for people who have been hired for a full-time job on or after January 1, 2022, by a Kansas-based employer in the aviation sector. You must also have a degree or technical certificate from a qualified program. The credit is also available to an employee relocating to Kansas with an out-of-state qualifying degree or certificate.
How can I get this tax credit?
The Kansas Department of Revenue has published tax form K-26 with instructions on how you can claim the Kansas Aviation Tax Credit beginning with your 2022 tax filing. If you qualify, you can claim the tax credit on your 2022 state taxes and reduce the taxes you owe by up to $5,000 per year.
How long will this benefit be available?
The Kansas Aviation Tax Credit is currently authorized for five years from 2022 to 2026. Any remaining unused tax credits can be used in the following four tax years after the credit was issued.
Example #1
Gilbert was hired in April 2022 as a sheet metal mechanic by a Kansas aviation business, and he meets all the qualifications to claim the Kansas Aviation Tax Credit. Without any overtime, he expects to earn about $35,000. Assuming Gilbert files taxes as single with no dependents, he could expect to receive about $1,330 from the Kansas Aviation Tax Credit in the first year. That works out to be equivalent to a $0.64 per hour after-tax pay increase or more than $100 in take-home pay per month. And when he files his 2022 taxes, he would still have $3,670 in unused tax credits to claim in any of the following four years. As long as Gilbert meets all the qualifications in 2023, 2024, 2025, and 2026, he will receive an additional $5,000 tax credit each of those years to apply toward his state tax liability.
Example #2
Monique was hired in May 2022 as an aerospace engineer by a Kansas aerospace company, and she meets all the qualifications to claim the Kansas Aviation Tax Credit. She expects to earn about $80,000, and together with her husband’s income, they plan to file taxes as married filing jointly. With their combined income, they have tax liability of more than $5,000, so Monique will get the benefit of claiming the full $5,000 on her 2022 taxes. That works out to be equivalent to a $2.40 per hour after-tax pay increase or more than $415 in take-home pay per month. As long as Monique meets all the qualifications in 2023, 2024, 2025, and 2026, she will receive an additional $5,000 tax credit each of those years to apply toward her state tax liability.
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This information is not to be construed as tax or legal advice. Consultation with your tax or legal advisor is recommended. The Kansas Department of Revenue has published tax form K-26 with instructions.
“Qualified employee” is defined in the statute as follows:
“Qualified employee” means any person newly employed on a full-time basis by or first contracting with a qualified employer on a full-time basis on or after January 1, 2022, who has been awarded an undergraduate or graduate degree, or a technical degree or certificate from a qualified program by an institution.”
Likewise, the statute defines a “qualified program” as follows: "Qualified program" means: (1) A program that has been accredited by the engineering accreditation commission of the accreditation board for engineering and technology (ABET), the federal aviation administration or a regional accrediting body and that awards an undergraduate or graduate degree; or (2) a program within the meaning of an associate of applied science degree program or career technical education program, within the meaning of those programs as defined in K.S.A. 74-32,407, and amendments thereto, whether a state or out-of-state program that results in the awarding of a degree or certificate that prepares the graduate for gainful employment with a qualified employer.
Notably, the tuition reimbursement tax credit also requires the qualified employee to have been awarded an undergraduate or graduate degree, or technical degree or certificate from a qualified program within one year prior to or following the commencement of employment with a qualified employer. To view regional accrediting commissions as posted on the Council for Higher Education Accreditation’s website, visit https://www.chea.org/regional-accrediting-organizations-accreditor-type and select one of the six regions to view an alphabetical listing of programs that have been accredited.
The statute states, “Any person newly employed on a full-time basis by or first contracting with a qualified employer on a full-time basis.” 1099/contract employees appear to be eligible under the “qualified employee” definition language in this legislation, presuming they meet the other qualifications.
According to the statute:
“Qualified employer” means a sole proprietorship, general partnership, limited partnership, limited liability company, corporation, other legally recognized business entity or public entity whose principal business activity involves the aviation sector.
“Aviation sector” means a private or public organization engaged in the manufacture of aviation or aerospace hardware or software, aviation or aerospace maintenance, aviation or aerospace repair and overhaul, supply of parts to the aviation or aerospace industry, provision of services and support relating to the aviation or aerospace industry, research and development of aviation or aerospace technology and systems, and the education and training of aviation or aerospace personnel.
According to the statute:
“Qualified employee” means any person newly employed on a full-time basis by or first contracting with a qualified employer on a full-time basis on or after January 1, 2022, who has been awarded an undergraduate or graduate degree, or a technical degree or certificate from a qualified program by an institution.
The Kansas Department of Revenue has published tax form K-26 with instructions. The intent of the legislation is to fill the aviation talent pipeline in the State of Kansas, not to create an incentive for job hopping between current Kansas aviation employers. We would expect qualifying employees who move to the state of Kansas for a job with a qualifying Kansas aviation employer to be eligible for the credit, including those who had previously worked for an out-of-state aviation company. Kansas tax form K-26 states that a newly employed person “…does not include a person already employed in the Kansas aviation sector or a person who was already employed in the Kansas aviation sector immediately.
Yes. The recruitment incentive is a tax credit that will be claimed on the employee’s personal tax return during tax filing season.
As long as the employee is qualified and the employer is qualified according to the bill language, they should be eligible. Generally speaking, employees file taxes in the state where they live. This is a Kansas income tax credit, so a qualified employee would need to be a tax filer in the State of Kansas. Consultation with a tax advisor is recommended.
Each employee is ultimately responsible for filing their own state income taxes. Eligible employees will need to individually claim the state income tax credit when they file their state taxes.
See above for definitions related to qualifying employees.
It would include bonus and overtime pay (wages subject to withholding tax), but not other benefits.
According to the statute:
"Compensation" means payments in the form of contract labor for which the payor is required to provide a federal tax form 1099 to the person paid, wages subject to withholding tax paid to a part-time employee or full-time employee, or salary or other remuneration. "Compensation" does not include employer-provided retirement, medical or healthcare benefits, reimbursement for travel, meals, lodging or any other expense.
In general, if the high school career technical education program awards a degree or certification, you can reasonably presume that it satisfies the definition of “qualified program.” However, this may be further defined in the Kansas Department of Revenue’s forthcoming regulatory guidance.
In the meantime, refer directly to the statue:
"Qualified program" means: (1) A program that has been accredited by the engineering accreditation commission of the accreditation board for engineering and technology (ABET), the federal aviation administration or a regional accrediting body and that awards an undergraduate or graduate degree; or (2) a program within the meaning of an associate of applied science degree program or career technical education program, within the meaning of those programs as defined in K.S.A. 74-32,407, and amendments thereto, whether a state or out-of-state program that results in the awarding of a degree or certificate that prepares the graduate for gainful employment with a qualified employer.
As referenced, K.S.A. 74-32,407 states:
"Career technical education" means organized educational programs offering a sequence of courses which are directly related to the preparation of individuals in paid or unpaid employment in current or emerging occupations requiring other than a baccalaureate or advanced degree. Such programs shall include competency-based applied learning which contributes to an individual's academic knowledge, higher-order reasoning, and problem-solving skills, work attitudes, general employability skills, and the occupational-specific skills necessary for economic independence as a productive and contributing member of society. The term "career technical education" also includes technology education and career and technical education as referenced in the Carl D. Perkins career and technical education act of 2006.
The Carl D. Perkins career and technical education act of 2006 at the end of page 3 and beginning on page 4 defines qualifying institutions/schools as follows:
(A) a specialized public secondary school used exclusively or principally for the provision of career and technical education to individuals who are available for study in preparation for entering the labor market; (B) the department of a public secondary school exclusively or principally used for providing career and technical education in not fewer than 3 different fields that are available to all students, especially in high-skill, high-wage, or in-demand industry sectors or occupations; (C) a public or nonprofit technical institution or career and technical education school used exclusively or principally for the provision of career and technical education to individuals who have completed or left secondary school and who are available for study in preparation for entering the labor market, if the institution or school admits, as regular students, individuals who have completed secondary school and individuals who have left secondary school; or (D) the department or division of an institution of higher education, that operates under the policies of the eligible agency and that provides career and technical education in not fewer than 3 different occupational fields leading to immediate employment but not necessarily leading to a baccalaureate degree, if the department or division admits, as regular students, both individuals who have completed secondary school and individuals who have left secondary school.
If the intern meets the definition of qualified employee: “any person newly employed on a full-time basis by or first contracting with a qualified employer on a full-time basis on or after January 1, 2022, who has been awarded an undergraduate or graduate degree, or a technical degree or certificate from a qualified program by an institution.”
If they meet all other qualifications, the qualified employee and qualified employer would still be eligible for their respective tax credits even if the employee is terminated within or after the year of hire.
Consult your tax professional or see tax form K-26 for more direction.
There’s always consideration for other tax credits, but these considerations are often limited (politically and fiscally) by their fiscal note (or financial impact to the state).
However, the intent of the legislation is to fill the aviation talent pipeline in the State of Kansas.
For the employee and employer tax credits, the degree or certification does not need to be received within one year of the hire date. If a new employee received their degree in a prior year and meets all of the other qualifications, they will be eligible for the credit.
Notably, the tuition reimbursement tax credit is the only credit that requires the qualified employee to have been awarded an undergraduate or graduate degree, or technical degree or certificate from a qualified program within one year prior to or following the commencement of employment with a qualified employer. The other credits don’t require the degree or certificate to be earned within a year.
Correct, as long as the certificate is earned within one year prior to or following the hire date. The tuition reimbursement tax credit requires the qualified employee to have been awarded an undergraduate or graduate degree, or technical degree or certificate from a qualified program within one year prior to or following the commencement of employment with a qualified employer.
Correct. The tuition reimbursement credit applies to qualified newly hired employees, with the additional caveat that the degree or certificate must be earned within one year prior to or following the hire date.
The definition of “qualified employer” encompasses pass-through entities as defined in the statute: (g)"Qualified employer" means a sole proprietorship, general partnership, limited partnership, limited liability company, corporation, other legally recognized business entity or public entity whose principal business activity involves the aviation sector.
The short answer is that it depends more on what the company does than on the specific type of job the employee has within the company. If the company is a qualified employer (“a sole proprietorship, general partnership, limited partnership, limited liability company, corporation, other legally recognized business entity or public entity whose principal business activity involves the aviation sector”) and the pilot is a qualified employee (“any person newly employed on a full-time basis by or first contracting with a qualified employer on a full-time basis on or after January 1, 2022, who has been awarded an undergraduate or graduate degree, or a technical degree or certificate from a qualified program by an institution”), then the corporate pilot should be eligible.
To reiterate, the legislation requires the employer to be a company whose principal business activity involves the aviation sector. If, hypothetically speaking, the corporate pilot works for an oil & gas company in Wichita, this employee would not be eligible for the employee tax credit. Please note that “aviation sector,” as defined in the bill, is only used in the definition of qualified employer (not in the definition of qualified employee).
Per the bill, “(f) "Qualified employee" means any person newly employed on a full-time basis by or first contracting with a qualified employer on a full-time basis on or after January 1, 2022, who has been awarded an undergraduate or graduate degree, or a technical degree or certificate from a qualified program by an institution.” Without knowing all the details of your intern employment, the key portion of the text is “newly employed on a full-time basis.”
The Kansas Department of Revenue has published tax form K-26.
Consult your tax professional or see tax form K-26 for more direction.
If you have any questions, contact Toni Porter, Vice President of Government Relations
at the Wichita Regional Chamber of Commerce at tporter@wichitachamber.org.
Consultation with your tax or legal advisor is recommended. The Kansas Department of Revenue will issue further guidance through rules and regulations.
