Does Kentucky Have a State Income Tax?

Kentucky imposes a state-level income tax on its residents and on income earned within the state by nonresidents. This tax applies to most sources of income, including wages and investment earnings. The structure of the tax utilizes a single rate for all income levels, which distinguishes it from the progressive tax systems used by the federal government and many other states.

Kentucky’s State Income Tax Rate

Kentucky applies a flat individual income tax rate of 4.0% for the 2024 tax year, which is the return filed in 2025. A flat tax system means that all taxable income is subject to the same percentage, regardless of how much a person earns, which simplifies calculations. This rate is the result of recent legislative changes, and for the 2026 tax year, it is scheduled to decrease further to 3.5%.

Determining Your Filing Requirement

Whether you are required to file a Kentucky income tax return depends on your residency status, family size, and gross income. Full-year residents must file if their modified gross income exceeds specific thresholds. For the 2024 tax year, a single individual must file if their modified gross income is more than $15,060, while a family of four has a threshold of $31,200. A return is also required if Kentucky adjusted gross income surpasses separate, lower thresholds.

Part-year residents and nonresidents must file a Kentucky return if they have any gross income from Kentucky sources and their total gross income from all sources exceeds the modified gross income threshold for their family size. This rule ensures that individuals who earn money within the state contribute to its tax base. Even if your income is below the filing thresholds, a return must be filed to receive a refund of any Kentucky income tax withheld from your pay.

Calculating Your Kentucky Tax Liability

The calculation of your tax obligation begins with your federal adjusted gross income, which is then modified with specific state-level adjustments. Kentucky allows for several subtractions from income, including a pension and retirement income exclusion of up to $31,110. Social Security benefits are fully exempt, and active-duty military pay is also fully deductible.

After determining your Kentucky taxable income, several tax credits can directly reduce the amount of tax you owe. The state offers a non-refundable child and dependent care credit for employment-related expenses. A family size tax credit is available for lower-income households, and an education tuition tax credit can be claimed for higher education expenses. Credits are also available for being age 65 or older or blind, providing a $40 credit for each qualifying condition.

How to File and Pay Your State Taxes

Full-year residents use Form 740, while nonresidents and part-year residents use Form 740-NP. For simpler tax situations, a Form 740-EZ may be available. The standard deadline for filing and paying your state income tax is April 15, which aligns with the federal tax deadline.

Taxpayers can file returns electronically through approved software vendors or the state’s free online portal, KY File. Paper returns can be mailed to the Department of Revenue. If you owe taxes, payment can be made electronically through the state’s website or by credit/debit card, though service fees apply to card payments. You can also mail a check or money order with a Form 740-V payment voucher.