How Much Does Kentucky Take Out for Taxes?

Kentucky levies various taxes that impact individuals, contributing to the state’s public services and infrastructure. The state’s tax structure includes income tax, sales and use tax, property tax, and several excise taxes. These taxes apply to earnings, consumption, and asset ownership. This overview covers the primary taxes individuals encounter in Kentucky.

Kentucky Individual Income Tax

Kentucky’s individual income tax applies to most income earned by residents and nonresidents from Kentucky sources. For the 2024 tax year, Kentucky utilizes a flat income tax rate of 4% for all individual taxpayers.

Taxable income can be reduced by certain deductions. Kentucky allows a standard deduction, which for 2024 is $3,160 for all taxpayers. Taxpayers also have the option to itemize deductions if their eligible expenses exceed the standard deduction amount. Common itemized deductions can include medical expenses exceeding a certain percentage of adjusted gross income, long-term care, and health insurance premiums.

Several credits are available to reduce an individual’s tax liability directly. For example, a $40 tax credit is provided for each individual listed on a return who is age 65 or older, and an additional $40 credit is available for individuals who are legally blind. Members of the Kentucky National Guard can also claim a $20 tax credit.

The state also offers credits for education tuition, equal to 25% of the federal American Opportunity Credit and Lifetime Learning Credit amounts. A nonrefundable family size tax credit is available for those with a total modified gross income of $41,496 or less for 2024, varying based on family size. A child and dependent care credit can be claimed, calculated as 20% of the federal credit amount. Certain types of income are exempt from Kentucky income tax, such as Social Security benefits and distributions from public, civil service, or military pension plans up to specific limits.

Kentucky Sales and Use Tax

Kentucky imposes a statewide sales tax on the purchase of tangible personal property and some services. The sales tax rate is 6% across the entire state, with no additional local sales taxes levied by cities or counties. The tax is applied at the point of sale.

While most retail sales are subject to this 6% rate, several common exemptions exist. Most food and food ingredients purchased for home consumption, such as groceries, meat, produce, and bottled water, are exempt from sales tax. However, prepared foods, dietary supplements, candy, soft drinks, and alcoholic beverages are generally taxable. Prescription drugs and certain medical devices are also exempt from sales tax.

A “use tax” complements the sales tax, applying when taxable goods or services are purchased outside Kentucky but are then used, stored, or consumed within the state, and Kentucky sales tax was not collected. The use tax rate is the same 6% as the sales tax, ensuring that consumers pay the appropriate tax regardless of where the purchase was made.

Kentucky Property Tax

Property taxes in Kentucky are assessed and levied on real estate by local authorities, primarily the Property Valuation Administrator (PVA) in each county. The state constitution requires that all real property be assessed at its fair cash value, reflecting the price it would bring in a voluntary sale. The PVA is responsible for revaluing all real property annually, with a physical inspection of each parcel occurring at least once every four years.

Property tax bills consist of both state and local components. While the assessment is conducted at the county level, the total tax amount is influenced by rates set by various taxing districts, including the state, county, city, and school district. This means the specific property tax liability can vary significantly depending on the property’s location within the state.

A significant exemption available to homeowners is the Homestead Exemption, which helps reduce the taxable value of a qualifying primary residence. To be eligible, homeowners must be at least 65 years old or classified as totally disabled. For the 2025-2026 tax periods, the homestead exemption amount is $49,100, which is deducted from the assessed value of the home before property taxes are calculated. This reduction directly lowers the property tax bill for eligible individuals.

Other Common Kentucky Taxes

Beyond income, sales, and property taxes, individuals in Kentucky encounter several other common taxes. One such tax is the motor vehicle usage tax, which is levied when a vehicle is transferred or first registered in the state. This tax is applied at a rate of 6% of the vehicle’s retail price or value. Annually, vehicle owners also pay a motor vehicle property tax.

Excise taxes are applied to specific goods. For instance, Kentucky imposes a gasoline excise tax, which for July 1, 2025, is approximately 26.4 cents per gallon. Tobacco products are also subject to excise tax, with cigarettes taxed at $1.10 per pack. Alcoholic beverages carry excise taxes as well, varying by product type: for example, malt beverages (beer) are taxed at $2.50 per 31-gallon barrel, wine at $0.50 per gallon, and spirits at $1.92 per gallon, with a lower rate for half-pint containers. These taxes are typically included in the product’s price.