The moneys in an adoption savings account may be:

• Used for eligible expenses related to a designated beneficiary's adoption of a child
• Used for eligible expenses that would have qualified, but the adoption was not completed
• Transferred to another newly created account
• Invested in certificates of deposit opened and designated as adoption savings accounts
• Used to pay service fees assessed by the financial institution.

The maximum contribution to an account in any tax year shall be $6,000 for an individual and $12,000 for a married couple filing a joint return. The maximum amount of all contributions made into an account in all tax years shall be $48,000 for an individual and $96,000 for a married couple filing a joint return. The maximum total amount in an account cannot exceed $100,000.

Beneficiary Rules

An individual may be the account holder for multiple accounts, and an individual may jointly own an account with another individual if such individuals file a joint income tax return. An account holder shall designate, not later than April 15 of the year following the taxable year during which the account is established, a prospective adoptive parent as the designated beneficiary of the account. Nothing in this section shall prohibit an account holder from designating such account holder as the designated beneficiary of an account. An account holder may change the designated beneficiary at any time, but no account shall have more than one designated beneficiary at any time. An individual may be designated as the designated beneficiary of more than one account if such accounts are held by separate account holders. No account holder shall be authorized to designate the same designated beneficiary on multiple accounts held by such account owner, except when opening certificates of deposit. The naming of a designated beneficiary should not create a survivorship interest in the account, and a payable on death beneficiary needs to be listed (In absence of payable on death beneficiary, reference Kansas probate code).

Funds may remain in an account for an unlimited duration without the interest or income being subject to recapture or penalty. If a contribution limit is exceeded, then thereafter, all interest or other income earned on the investment of moneys in an account shall be subject to the tax imposed by the Kansas income tax act. The account holder shall not use moneys in an account to pay expenses of administering the account, except that a service fee may be deducted from the account by a financial institution.

Recapture & Penalty Rules

Moneys withdrawn from an account shall be subject to recapture by the secretary in the tax year in which they were withdrawn if, at the time of the withdrawal, it has been less than a year since the first deposit in the account or the moneys are used for any purpose other than authorized transactions listed above. Money that is subject to recapture shall be equal to the amount withdrawn and added to the adjusted "gross" income of the account holder, or if they are not living, the designated beneficiary.

If any money is subject to recapture, the account holder shall pay a penalty in the following amounts:

• If the withdrawal of money occurred 10 or less years after the first deposit in the account, 5% of the amount subject to recapture
• If the withdrawal of money occurred more than 10 years after the first deposit in the account, 10% of the amount subject to recapture.

These penalties do not apply if money is withdrawn after the death of the designated beneficiary, and the account holder has not assigned a new designated beneficiary within the same year.

If the account holder dies, or if the account is jointly owned and both of the owners die, and the account does not have a surviving payable on death beneficiary, then all of the money in the account resulting from contributions or income earned from assets in the account shall be subject to recapture in the tax year of death.

Filing & Documentation Requirements

An account holder shall annually file with the account holder’s state income tax return all forms required by the secretary. This includes form 1099 for the account issued by the financial institution. The secretary will establish rules and regulations to administer the provisions of this act by July 1st, 2025. The account holder shall be responsible for maintaining all documentation for the account and for eligible expenses related to the designated beneficiary's adoption of a child.

Tax Contributions made by Kansas state income taxpayers to an Adoption Savings Account during the tax year may qualify for a state income tax deduction for the account holder. Up to $6,000 can be deducted for individual filers, and up to $12,000 can be deducted for joint filers.

Please consult with your tax advisor or contact the Kansas Department of Revenue for guidance on deducting contributions made into an Adoption Savings Account.

Account holder: An individual who establishes an account that is designated as an adoption savings account with a financial institution.

Designated beneficiary: The individual designated by an account holder as the individual whose eligible expenses are expected to be paid from the account for the adoption of a child.

Financial institution: Any state or federally chartered bank, trust company, savings and loan association or credit union that is both authorized to do business in this state insured by the federal deposit insurance corporation or the national credit union administration.

Eligible Expenses: Eligible expenses include:

• Reasonable fees for legal and other professional services rendered in connection with an adoption or placement for adoption not to exceed customary fees for similar services by professionals of equivalent experience and reputation where the services are performed
• Reasonable fees of a licensed child-placing agency
• Actual and necessary expenses incidental to the adoption or placement proceeding
• Actual medical expenses of the mother attributable to pregnancy and birth
• Actual medical expenses of the child
• Reasonable living expenses of the mother that are incurred during or as a result
of the pregnancy.