1031 Exchange in Kansas: No Deed Tax, Use-Value Farmland and DSTs

Kansas taxes recognized gain at 5.2% or 5.58%, and 2026 brought no cut

Kansas taxes individual income in two brackets: 5.2% on the first $23,000 of taxable income for single filers ($46,000 for joint filers) and 5.58% on everything above. A capital gain from selling a Wichita fourplex or a Johnson County strip center is ordinary income on Form K-40, with no lower rate and no exclusion.

Senate Bill 269, passed in 2025, set up a trigger that would ratchet those rates toward a flat 4% whenever state receipts beat the inflation-adjusted prior year and the rainy-day fund holds 15% of receipts. The Department of Revenue's Notice 25-06 (October 2, 2025) reported that FY 2025 collections came in $88.5 million short of the target, so there is no rate reduction for tax year 2026 even though the stabilization fund stood at 19.1%.

The deferral itself is simple. Line 1 of the K-40 is federal adjusted gross income, and gain deferred under §1031 is not in that figure, so nothing Kansas-specific has to be elected or attached; see how a 1031 exchange works for the federal side.

No deed tax, no closing withholding, no claw-back: what Kansas skips

Kansas is one of the few states with no real estate transfer or documentary tax. The old mortgage registration tax was phased down from 0.26% starting in 2015 and repealed altogether for 2019, so what a Kansas seller pays at the register of deeds is a per-page recording fee ($17 for the first page of a deed, $13 for each additional page) rather than a percentage of price.

Kansas also has no requirement that a buyer or title company withhold state income tax from an out-of-state seller's proceeds. A nonresident who sells Kansas real estate reports the gain on the nonresident Schedule S, but nothing is held back at closing, and a 1031 seller has no exemption certificate to apply for.

Nor does Kansas track deferred gain after you leave. When a Kansas investor exchanges into property in Texas or a DST holding assets in six other states, Kansas has no rule that taxes the original Kansas gain when the replacement property is eventually sold.

• One filing the deed does require: a Real Estate Sales Validation Questionnaire under K.S.A. 79-1437c, completed by the grantor, grantee or their agent, kept by the register of deeds for five years and not opened to the public.

K.S.A. 79-503a keeps your exchange price out of the appraiser's comparables

Since the 2024 special-session tax bill, Kansas law states that the price at which property sells in an Internal Revenue Code §1031 exchange "shall not be considered an indicator of fair market value nor as a factor in arriving at fair market value" for property tax purposes. The same statute bars county appraisers from using exchange transactions as comparable sales or as valid sales in the ratio studies that test appraisal accuracy.

For a seller, that means the number on your closing statement does not become the benchmark for the neighbor's next valuation notice; for a Kansas buyer completing an exchange, it means the exchange price alone should not drive the following year's appraisal. If you are the Kansas buyer in someone else's exchange, the rule works the same way, and the appraiser must value the parcel on other evidence.

Legislative staff scored the fiscal effect as indeterminate, which is a polite way of saying the rule is new and county practice is still settling. Keep the exchange documents with your property-tax file in case an appeal turns on whether the sale should have been excluded.

Selling Kansas farmland: use-value appraisal at 30%, tied to the land rather than the owner

Kansas values land devoted to agricultural use on what it can earn, not on what it would fetch. K.S.A. 79-1476 directs the Division of Property Valuation to average eight years of prices, yields and rents and capitalize the net income at a rate held between 11% and 12%; the result is assessed at 30%, compared with 11.5% for residential property, 12% for vacant lots and 25% for commercial buildings, including buildings that sit on farmland.

The classification depends on current use and the land's inherent capability, and the statute contains no provision that a sale or change of ownership resets it. A buyer who keeps a Reno County quarter section in crops keeps the use value; a buyer who plats it for houses does not.

An investor exchanging out of Kansas farm ground into a DST leaves that system entirely, since the replacement properties are appraised under the rules of the states where they sit; the use-value history of the relinquished land has no bearing on the exchange itself.

Kansas oil and gas leases are personal property to the county appraiser

Kansas treats producing oil and gas leases and wells as personal property for property-tax purposes under K.S.A. 79-329, appraised each year from state-published guides that convert production volume and average price into value. Leasehold interests are assessed at 25% where a well averages five barrels of oil or 100 mcf of gas a day or less, and 30% above that; royalty interests are assessed at 30% regardless of volume.

An investor exchanging out of Kansas land that carries a working or royalty interest should have the mineral interest valued and documented separately from the surface, because the county has been taxing it as a distinct item and the buyer's title company will treat it that way. Whether a particular interest counts as like-kind real property for federal purposes is a separate question covered under eligibility requirements; Kansas's personal-property label is a property-tax classification, not an income-tax one.