Kentucky State Taxes
Quick Tax Facts
Income Tax: 3.5%
State Sales Tax: 6%
Median Property Tax: $1,418
Overview
The Bluegrass State (Kentucky) is known for its beautiful landscapes, abundant outdoor activities, and horses. But the home of the Kentucky Derby may not be everyone’s top pick. Although the state has a flat income tax rate, it can translate into higher taxes for many residents. Thankfully, the state does have a fairly modest sales tax rate and its average property tax amount is one of the lowest in the country.
Kentucky Income Tax
Kentucky has a flat income tax rate. As a result of House Bill 8, which was passed during the 2022 legislative session, the individual income tax rate will drop by half a point (.50%) annually if certain conditions are met until it is eliminated. For the 2026 tax year, the income tax rate is 3.5%.
Who Must File?
If you are a full-year Kentucky resident, your filing requirement depends on your family size, modified gross income, Kentucky adjusted gross income, and any self-employment income you may have earned. If your modified gross income exceeds the amount in Chart A below and your Kentucky adjusted gross income exceeds the amount in Chart B, you must file a state income tax return (Form 740).
| Chart A: Modified Gross Income & Family Size |
|---|
| If your family size is: | Modified gross income is greater than: | |
|---|---|---|
| One | and | $15,060 |
| Two | and | $20,440 |
| Three | and | $25,820 |
| Four or more | and | $31,200 |
| Chart B: Kentucky Adjusted Gross Income |
|---|
| If your filing status is: | Kentucky adjusted gross income is greater than: | |
|---|---|---|
| Single (under 65) | and | $3,160 |
| Single (65+ or blind) | and | $4,160 |
| Single (65+ and blind) | and | $5,160 |
| Married (both under 65) | and | $3,160 |
| Married (one 65+) | and | $4,160 |
| Married (both 65+) | and | $5,160 |
Kentucky adjusted gross income is your federal adjusted gross income plus any additions or subtractions from Kentucky Schedule M, Modifications to Federal Adjusted Gross Income.
If you are self-employed, you must file a state income tax return if you have gross receipts above the income for your family in Chart A, regardless of how much you have in Kentucky adjusted gross income (Chart B).
It’s important to note that there are no special provisions for a dependent whose income exceeds the filing threshold. Minors meeting these requirements are also required to file a state return.
Other Residents
Non-residents and part-year residents must file an income tax return (Form 740-NP, Kentucky Nonresident and Part-Year Resident Individual Income Tax Return) if any gross income from Kentucky sources or other sources exceeds the modified gross income limits for their family size. The thresholds are the same as those for full-year resident taxpayers.
Kentucky has reciprocal agreements with Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin. Any non-resident who lives in one of these states but earns wages and salaries in Kentucky is exempt from filing an income tax return. Instead, they should file Form 740-NP-R to receive a refund of any Kentucky income tax withheld.
Kentucky Sales Tax
Kentucky has a state sales tax rate of 6%. Kentucky does not levy local or county sales taxes.
Kentucky Property Taxes
In Kentucky, property taxes are levied at both the state and local levels. State law requires the state real property tax rate to be reduced anytime the statewide total of real property assessments exceeds the previous year’s assessment by more than 4%. The rate is set annually by July 1.
Each county has a general rate that is set by the fiscal court and a school district rate set by the local school board.
The median property tax in Kentucky is approximately $1,418 annually. Oldham County has the highest property tax at an average of $3,300. The lowest amount is $357 in Wolfe County.
| Highest | $3300 |
|---|---|
| Median | $1418 |
| Lowest | $357 |
Yearly Cost Per Resident
Kentucky Tax Holidays
At this time, Kentucky does not have any tax holidays scheduled.
Kentucky Tax Relief
Unpaid Kentucky income taxes can become more difficult to manage over time as penalties and interest increase your outstanding balance. If taxes remain unresolved, the Kentucky Department of Revenue (DOR) may begin collection efforts to recover what is owed. Whether you’re dealing with past-due returns, financial challenges, or business-related tax obligations, addressing the issue promptly may help keep your tax situation from escalating.
If paying your Kentucky tax balance in full isn’t possible, there may be options available to help you resolve your account. Depending on your situation and eligibility, you may be able to establish a payment agreement or apply for an Offer in Settlement. Taking steps toward a resolution may also help you avoid or address collection actions such as tax liens, wage garnishments, and bank levies.
Understanding how Kentucky handles delinquent taxes and which tax relief options may apply to your situation can make it easier to determine your next steps and work toward resolving your outstanding balance.
Common Kentucky State Tax Problems
Back Taxes
If you owe unpaid Kentucky taxes, addressing your balance early may help you avoid additional penalties and collection actions.
Unfiled Tax Returns
Filing past-due Kentucky tax returns is often the first step toward resolving your state tax issues.
Tax Notices
Notices from the KY Department of Revenue shouldn’t be ignored, as they often require prompt action to prevent further collections.
Liens & Levies
Unresolved tax debt may lead to liens against your property or levies on your assets as the state works to collect what is owed.
Garnishment
Kentucky may garnish your wages to collect unpaid taxes, reducing the amount of each paycheck you receive.
Tax Penalties
Unpaid taxes can continue to accrue penalties and interest until your balance is resolved.
How Kentucky Collects Tax Debt
If you owe Kentucky income taxes, the state will send you a Notice of Tax Due that details your outstanding balance, including any penalties and interest fees. This bill will also include a 25% collection fee. You have 60 days to pay or file a formal protest.
If you ignore the payment request, the Division of Collections will send a certified Final Notice before moving to more aggressive collection actions. This may include tax liens and levies, wage garnishment, and refund offsets.
Penalties and interest will continue to accrue while your balance is outstanding. Addressing your tax debt as early as possible can help you avoid additional costs and more serious collection actions.
Notice of Tax Due sent to taxpayer
Notice of State Tax Lien
Account sent to collections
Kentucky State Tax Relief Options
Kentucky offers a few relief options, including:
- Payment Plans – Kentucky offers payment plans for those who can’t pay in full on time or within 60 days of the due date.
- Offer in Settlement – Taxpayers facing economic hardship may submit an Offer in Settlement if they owe more than $3,000. A $500 non-refundable deposit must accompany the application.
If you’re experiencing financial hardship and can’t pay your Kentucky income tax bill, contact the Division of Collections as soon as possible to avoid collection actions.
When to Seek Tax Relief Help
If you’re experiencing any of the following, it may be time to explore your tax relief options:
You’re Receiving Collection Notices
Ignoring Kentucky tax notices can lead to more serious collection actions, so it’s often best to address the issue early.
You Can’t Afford to Pay Your Taxes
If paying your Kentucky state tax bill in full isn’t realistic, there may be payment or resolution options available.
Collection Actions Have Started
If you’re facing wage garnishments, bank levies, or tax liens, professional guidance may help you understand your options.
The sooner you address your tax debt, the more options you may have available to resolve your balance and minimize additional collection actions.
Kentucky Tax Relief FAQs
Kentucky Tax Resources
If you need assistance preparing your Kentucky state taxes, you can speak with a tax professional from Tax Defense Network by calling 855-476-6920.
You can also visit the Kentucky Department of Revenue website for additional resources.
- Make a Tax Payment
- Where’s My Refund?
- Find a Form
- Taxpayer Assistance: 502-564-4581
