State-by-State Guide to Taxes on Middle-Class Families
Tool | November 2021

Kentucky State Tax Guide for Middle-Class Families

State tax rates and rules for income, sales, gas, property, cigarette, and other taxes that impact middle-class families.

Kentucky

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The Bottom Line
Flag of Kentucky

Not Tax-Friendly

Kentucky's current 5% flat tax, plus additional taxes on wages in some local jurisdictions, translates to a relatively high income tax burden for middle-class families in the state (rate reductions may be triggered in the future). However, on the bright side, the Bluegrass State prevents local governments from adding to the state's relatively modest sales tax rate. The property tax burden is light, which also helps. Nevertheless, Kentucky's overall tax burden for middle-class families is on the high end.

Income Tax Range

Kentucky has a flat income tax rate of 5%. Certain counties, cities and other local government entities (such as school boards) can levy an additional occupational license payroll tax on wages earned by employees working within their boundaries.

If certain revenue and budget conditions are met, the state rate will be reduced to 4.5% beginning in 2023. Further 0.5% reductions are possible in future years if the same conditions are met and the state legislature authorizes a reduction.

Sales Tax

6% state levy. No local taxes.

Groceries: Exempt
Clothing: Taxable
Motor Vehicles: Exempt if 6% motor vehicle usage tax is paid
Prescription Drugs: Exempt

Real Property Taxes

In Kentucky, the median property tax rate is $851 per $100,000 of assessed home value.

Motor Fuel Taxes

Gasoline: 26¢ per gallon.
Diesel: 23¢ per gallon.

Sin Taxes

Cigarettes: $1.10 per pack
Snuff: $0.19 per unit of 1.5 ounces
Chewing tobacco: Approximately $0.05 per ounce
Other tobacco products: 15% of wholesale price
Vapor products: $1.50 per cartridge for closed systems; 15% of wholesale price for other products

Beer: $0.08 per gallon
Wine: $0.50 per gallon
Liquor: $1.92 per gallon
An 11% sales tax is also charged at the wholesale level on liquor; the rate for wine and beer is 10%.

Annual Car Taxes and Fees

An annual vehicle property tax based on the car's value is imposed. Additional local taxes may apply.

Estate and Inheritance Taxes

Kentucky has an inheritance tax, but the decedent's spouse, parents, children, grandchildren, and siblings are exempt. Nieces, nephews, daughters-in-law, sons-in-law, aunts, uncles, and great-grandchildren are taxed at rates ranging from 4% to 16%, depending on the value of the property inherited (the first $1,000 of property is exempt). All other heirs are taxed at rates ranging from 6% to 16% (their exemption is only for the first $500 of property).