How Much Tax Is Deducted From a Paycheck in KY?
Gain clarity on your Kentucky paycheck by understanding the layers of deductions, including the state's flat tax and distinct local occupational taxes.
When you receive a paycheck in Kentucky, the amount you actually take home is less than your total earnings. This is because various deductions are taken out. The initial amount you earn is called gross pay. After all deductions are subtracted, the remaining amount, known as net pay or take-home pay, is what you receive. These deductions are a combination of mandatory taxes and voluntary contributions for benefits.
Federal Tax Deductions
A significant portion of your paycheck deductions goes toward federal taxes. The largest of these is the federal income tax withholding. This amount is not a flat rate; instead, it is determined by the information you provide on your Form W-4. Your filing status, the number of dependents you claim, and any additional income or deductions you report on this form will directly impact how much is withheld.
Separate from income tax are FICA taxes, which are comprised of two distinct parts: Social Security and Medicare. For 2025, the Social Security tax is a flat 6.2% on your gross wages up to an annual limit of $176,100. Once you earn more than this amount in a year, Social Security tax is no longer deducted.
The second part of FICA is the Medicare tax, which is a flat 1.45% of all your gross wages, with no annual income limit. An additional Medicare tax of 0.9% applies to individuals with earnings over $200,000. FICA taxes are calculated at a constant rate on your earnings.
Kentucky State and Local Tax Deductions
In addition to federal taxes, your paycheck in Kentucky is also subject to state and local tax deductions. Kentucky has a state income tax, which is currently set at a flat rate of 4.0% for 2025. This rate is applied to your taxable income after accounting for the state’s standard deduction. To determine the amount of state tax to be withheld, you will complete a Kentucky Form K-4, which functions similarly to the federal W-4.
Local occupational taxes are local income taxes levied by many cities and counties on the wages of individuals who work within their geographical boundaries. This tax is based on your work location, not where you live. The rates for these occupational taxes vary by jurisdiction.
For example, in Louisville-Jefferson County, the combined occupational tax rate for residents is 2.2%. For non-residents working in Louisville, the rate is 1.45%. In Lexington-Fayette Urban County, the occupational license tax is 2.25%. The Fayette County Public School system also levies its own occupational license tax, which is 0.75%.
Other Common Paycheck Deductions
Beyond mandatory taxes, your paycheck may have other deductions for various benefits. Pre-tax deductions are subtracted from your gross pay before any income taxes are calculated. This lowers your taxable income and the amount of income tax you owe. Common examples of pre-tax deductions include premiums for health, dental, and vision insurance, as well as contributions to retirement plans like a 401(k) or 403(b).
Post-tax deductions are taken out of your paycheck after all taxes have been calculated. These deductions do not lower your taxable income. Examples of post-tax deductions include contributions to a Roth 401(k) plan, disability insurance premiums, union dues, and wage garnishments. While they do not offer an immediate tax advantage, some post-tax contributions, like those to a Roth 401(k), can provide tax-free withdrawals in retirement.
Understanding Your Kentucky Pay Stub
Your pay stub provides a detailed breakdown of your pay and deductions for a specific pay period. Your gross pay is your total earnings before any deductions are taken out. Each deduction will be listed as a separate line item, allowing you to see exactly where your money is going.
You will see line items for federal taxes, which may be abbreviated as ‘Federal,’ ‘FWT’ (Federal Withholding Tax), or ‘FIT’ (Federal Income Tax). FICA taxes are often listed as ‘FICA,’ ‘SS’ (Social Security), ‘OASDI’ (Old Age, Survivors, and Disability Insurance), or ‘Medicare’. Kentucky state income tax might appear as ‘KY,’ ‘SWT’ (State Withholding Tax), or ‘SIT’ (State Income Tax).
The local occupational tax will typically be identified by the name of the city or county, such as ‘Louisville’ or ‘Lexington,’ or simply as ‘Local’. Other deductions for benefits will also be itemized, with common abbreviations like ‘Health Ins’ for health insurance or ‘401k’ for retirement plan contributions.