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Kentucky Tax Guide: Flat 4% Income Tax Rate

Understand Kentucky's flat income tax, moderate sales and property taxes, and available deductions for 2025.

4.0%
Flat Income Tax Rate
6.00%
Sales Tax Rate
0.83%
Property Tax Rate
#30
Tax Burden Rank

Tax Overview

Kentucky uses a flat income tax rate of 4%, reduced from 4.5% as part of ongoing tax reform efforts. The state has been gradually lowering its income tax rate and may continue to do so if revenue targets are met. Kentucky uses federal adjusted gross income as the starting point for calculating state tax, with certain modifications.

Sales tax in Kentucky is 6% with no local option taxes, providing a uniform rate statewide. This simplicity is beneficial for businesses operating across the state. Kentucky exempts most groceries and prescription medications from sales tax, though prepared food is taxable. The state has expanded its sales tax base to include more services in recent years as part of the revenue offset for income tax rate reductions.

Property taxes in Kentucky are among the lowest in the nation, with effective rates around 0.83%. The state mandates a homestead exemption for homeowners age 65 and older, which removes a significant portion of the home's assessed value from taxation. Kentucky does tax some forms of retirement income, but Social Security benefits are exempt, and there are exclusions available for pension income.

Income Tax

Kentucky's flat rate was reduced from 4.5% to 4% as part of ongoing tax reform. Further reductions are possible contingent on revenue performance.

Flat Tax Rate: 4.00%

Sales Tax

State Rate6.00%
Avg. Local Rate0.00%
Combined Rate6.00%

Property Tax

Effective Rate0.83%
Median Annual Bill$1,382

Key Deductions in Kentucky

  • ✓Kentucky standard deduction of $3,160
  • ✓Pension income exclusion (up to $31,110)
  • ✓Family size tax credit for low-income taxpayers
  • ✓Education tuition tax credit
  • ✓Child and dependent care credit
  • ✓Kentucky 529 plan contribution deduction

Filing Information

Filing Deadline: April 15

Tax Authority: Kentucky Department of Revenue

Phone: (502) 564-4581

Website: https://revenue.ky.gov

Frequently Asked Questions

Is Kentucky continuing to reduce its income tax rate?
Kentucky enacted legislation allowing the income tax rate to be reduced by 0.5% increments when certain revenue triggers are met. The rate dropped from 4.5% to 4%, and further reductions to 3.5% or lower are possible in future years.
Does Kentucky tax pension income?
Kentucky allows an exclusion of up to $31,110 of pension and retirement income per person. Income above this threshold is taxable at the flat 4% rate. Social Security benefits are fully exempt from Kentucky income tax.
What services are taxed in Kentucky?
Kentucky expanded its sales tax to cover more services as part of tax reform, including landscaping, janitorial services, small animal veterinary services, laundry, and various personal services. This broadened base helped offset income tax rate reductions.
How does the Kentucky homestead exemption work?
Kentucky homeowners age 65 or older (or totally disabled) qualify for a homestead exemption that removes a portion of the home's assessed value from property taxation. The exemption amount is adjusted periodically for inflation.

Neighboring State Guides

IndianaOhioWest VirginiaVirginiaTennesseeMissouriIllinois

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