K-120EX: Expensing Deduction (2024)

Who files this form

Use Schedule K-120EX if you elect the Kansas expensing deduction or must report recapture of a previously claimed deduction.

The election is available to income tax and privilege tax filers for eligible property placed in service in Kansas during the taxable year. File the schedule with Form K-120, K-120S, K-130, K-40 or K-41, as applicable.

For a combined return, each entity that made a qualifying investment must complete its own K-120EX and enclose it with the return. Partners or shareholders reporting recapture of a deduction received from a pass-through entity complete Part C and lines 2 through 5 of Part A.

What you'll need

• Federal Form 4562: For a paper return, enclose it with each K-120EX, along with any additional schedules needed to reconcile its amounts to the Kansas deduction claimed.
• Taxpayer and entity information: Have the taxpayer's name and SSN or EIN. Partners, shareholders and members also need the pass-through entity's name, EIN and their ownership percentage.
• Depreciation information: You need the property's recovery period, depreciation method, basis, bonus depreciation and Section 179 deduction.
• Recapture information, if applicable: Have the original recovery period, year placed in service and Kansas expensing deduction previously allowed.
• Pass-through schedule, if applicable: The partnership or S corporation should supply its shareholders or partners with the entity's K-120EX.
• Additional schedules: Enclose a separate schedule if you need more space for combined-group deductions or recapture.

How to file

Make the expensing election by filing K-120EX with your applicable Kansas return: K-120, K-120S, K-130, K-40 or K-41.

1. Enter the taxpayer and any applicable pass-through entity information.
2. Complete Part B to calculate the deduction, Part C to calculate recapture, or both, as applicable.
3. Transfer Part B, line 11 to Part A, line 1, and Part C, line 12 to Part A, line 2. Complete the applicable Part A lines.
4. Follow the directions for your return type when transferring the result. K-40 and K-41 filers stop at line 5. Other filers follow the applicable directions, including the SALT PARITY directions for K-120S and K-121S.

For a paper return, enclose federal Form 4562 with each K-120EX and any necessary reconciliation schedules. The supplied text does not give a mailing address or e-filing directions.

Common mistakes

• Submitting a photocopy or stapling the form: The form says not to submit photocopies and not to staple.
• Using the same investment for incompatible tax benefits: An investment claimed for expensing cannot also be used for the listed credits, accelerated depreciation or deductions: K-35, K-38, K-53, K-59, K-62, K-73, K-77, K-78, K-80, K-81, K-82 and K-83.
• Using a different recovery period: Part B's recovery period should match federal Form 4562. For recapture, use the recovery period from the original expensing deduction.
• Missing return-specific instructions: K-40 and K-41 filers stop at Part A, line 5. K-120S and K-121S filers must enter zero on line 8 when completing that line.
• Sharing the resulting net operating loss: Only the entity that claimed the initial deduction may use that loss, not another entity in a combined group. For K-120S or K-121S filed under SALT PARITY, the loss must stay with the entity.

Questions people ask

What property can qualify?

Eligible property includes tangible property depreciable under the modified accelerated cost recovery system and certain computer software described in the instructions. Exclusions include residential rental property, nonresidential real property, railroad grading or tunnel bores, and property with a recovery period longer than 25 years. The property must be placed in service in Kansas during the taxable year.

How is the deduction calculated?

Subtract federal bonus depreciation and the Section 179 deduction from the property's federal depreciable cost. Multiply the remaining amount by the factor in the instructions for the property's depreciation method and recovery period.

What happens if I sell the property or move it out of Kansas?

If the property is sold, disposed of or moved out of Kansas within its recovery period, the previously determined deduction is subject to recapture as Kansas taxable income. Report recapture in Part C. There is no recapture after the recovery period has expired.

What if the deduction is larger than Kansas net income?

The excess is treated as a Kansas net operating loss of the entity that made the original investment. Part A, line 10 calculates the remaining loss to carry forward to the next year's return.

Official sources

• https://www.ksrevenue.gov/pdf/k-120ex24.pdf