State tax rates and rules for income, sales, gas, property, cigarette, and other taxes that impact middle-class families. Go to the Kiplinger Tax Map Kentucky Add to State Compare List | View List View State Compare List (0) selected | Compare up to 5 The Bottom Line 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: ExemptClothing: TaxableMotor Vehicles: Exempt if 6% motor vehicle usage tax is paidPrescription 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 packSnuff: $0.19 per unit of 1.5 ouncesChewing tobacco: Approximately $0.05 per ounceOther tobacco products: 15% of wholesale priceVapor products: $1.50 per cartridge for closed systems; 15% of wholesale price for other productsBeer: $0.08 per gallonWine: $0.50 per gallonLiquor: $1.92 per gallonAn 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).