Tool | August 2013
State-by-State Guide to Taxes on Retirees
State Sales Tax
6% (food, prescription drugs, residential utilities except telephone, and some medical supplies are exempt)
Income Tax Range
Low: 2% (on less than $3,000 of taxable income)
High: 6% (on more than $75,000 of taxable income)
Social Security benefits are not taxed.
Exemptions for Other Retirement Income
Railroad Retirement benefits are exempt. Kentucky offers a retirement-income exclusion of up to $41,110, which includes distributions from IRAs and 401(k)s as well as private pensions and annuities. There is an additional exclusion for qualified military, civil-service, and state and local government pensions.
Property in Kentucky is subject to state and local property tax. The state property tax rate for 2013 is 12.2 cents per $100 of assessed value. Property is assessed at 100% of fair market value. Kentucky has a homestead exemption on the assessed value of a qualifying single-unit residential property, which is adjusted every two years according to the cost-of-living index. Median property tax on the state's median home value of $117,800 is $843, according to the Tax Foundation.
Tax breaks for seniors: For homeowners 65 and older or totally disabled, $36,000 of the assessed value of their property is exempt from state taxes under the homestead provision for 2013.
Kentucky has an inheritance tax, but all Class A beneficiaries (spouse, parent, child, grandchild, brother and sister) are exempt. Other beneficiaries are subject to inheritance tax rates ranging from 4% to 16%. There is no estate tax.
Editor's Picks From Kiplinger
- 6 Tax Factors to Consider When Picking a Retirement Destination
- States Differ on Retiree Tax Burden
- SLIDE SHOW: 10 Most Tax-Friendly States for Retirees
- SLIDE SHOW: 10 Least Tax-Friendly States for Retirees
- VIDEO: Tax-Friendly States for Retirement
- SLIDE SHOW: 10 Things You Must Know About Social Security
- SLIDE SHOW: 10 Things You Must Know About Traditional IRAs
- SLIDE SHOW: 5 Costly Retirement Surprises
- SPECIAL REPORT: Maximize Your Social Security Benefits
- ORDER: Kiplinger's Social Security Solutions
- TOOL: Kiplinger's State-by-State Guide to Taxes
- TOOL: Find the Best, Latest Mortgage Rates in Any State