What Kentucky Tax Deductions Can I Claim?
Understand the key strategies for reducing your Kentucky taxable income, from foundational choices to specific subtractions unique to the state.
Tax deductions reduce your taxable income, which can lower the amount of state income tax you owe to Kentucky. By subtracting allowed expenses from your gross income, you arrive at a lower income figure upon which your tax is calculated. These subtractions are governed by specific state rules.
Choosing Between Standard and Itemized Deductions
Every Kentucky taxpayer must decide whether to take the standard deduction or to itemize deductions. For the 2025 tax year, the Kentucky standard deduction is $3,270. This is a fixed dollar amount that you can subtract from your income without having to document specific expenses.
You should calculate the total of all your potential itemized deductions. If this total is greater than the $3,270 standard deduction, it is advantageous to itemize. If your total itemized deductions are less than this amount, the standard deduction will offer a larger tax benefit.
Consider a single taxpayer with $4,000 in eligible itemized deductions. In this case, itemizing would be the better option because it reduces their taxable income by $4,000, which is $730 more than the standard deduction. Conversely, if that same taxpayer only had $2,500 in eligible expenses, they would be better off claiming the standard deduction.
Kentucky Itemized Deductions
If you determine that itemizing is the better financial choice, Kentucky’s list of allowable deductions is more limited than the federal government’s. For the 2025 tax year, taxpayers can deduct home mortgage interest and charitable contributions on the Kentucky Schedule A. The deductions for medical expenses and state and local taxes are not permitted.
The home mortgage interest deduction is available for homeowners and applies to interest on a loan used to buy, build, or substantially improve a main or second home, provided the debt is secured by the property.
Charitable contributions made to qualified organizations are also deductible. It is important to maintain thorough records for all donations, such as a bank record or a written acknowledgment from the charity for cash gifts.
Adjustments to Income
Separate from itemized deductions are adjustments to income, often referred to as “above-the-line” deductions because they are available to all taxpayers, regardless of whether they itemize. Kentucky’s tax calculations begin with federal adjusted gross income (AGI). This means that key federal adjustments, such as those for traditional IRA contributions, self-employed health insurance premiums, and student loan interest, are already accounted for before calculating your Kentucky-specific tax liability.
In addition to conforming to the federal AGI, Kentucky offers a specific adjustment for educators. Eligible teachers and aides can deduct a limited amount of unreimbursed expenses for books and supplies purchased for their classrooms.
Kentucky-Specific Subtractions from Income
Kentucky offers several unique subtractions from income. The pension and retirement income exclusion for 2025 allows taxpayers to exclude up to $31,110 of their income received from pensions, annuities, IRAs, 401(k)s, and other retirement plans from their state taxable income.
A significant subtraction is that Kentucky does not tax Social Security benefits. All Social Security income that might be taxable at the federal level is fully exempt from Kentucky state income tax.
Contributions made to a Kentucky Educational Excellence Scholarship (KEES) Trust, more commonly known as a Kentucky 529 plan, are deductible up to a certain annual limit per taxpayer. Kentucky also provides a subtraction for certain unreimbursed expenses incurred by an individual related to organ donation.