Kentucky Tax Guide 2025
Explore Kentucky's 2025 state tax rates for income, sales, property, retirement, and more. Learn how Kentucky compares nationwide.


Navigating the complexities of state taxes can be daunting, but understanding Kentucky's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Bluegrass State's tax system, from income and sales taxes to property taxes and retirement benefits.
Kentucky state tax: Overview
Kentucky offers a flat personal income tax, local wage taxes, and an inheritance tax, but it keeps things simple by preventing local sales tax hikes. Property taxes are among the lowest in the region, making Kentucky appealing for homeowners.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
With talk of possible tax reform, there could be even more changes on the horizon to make the state more attractive to businesses and residents.
For instance, the Bluegrass State has voted to lower its income tax rate. For more information, see Kentucky Has a New Income Tax Rate: What to Know.
Here's more on Kentucky taxes.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]
Kentucky income tax rate
Kentucky generally has a flat income tax rate for 2025 of 4.0%. Lawmakers voted earlier this year to lower the rate to 3.5%, which will take effect in January 2026.
Kentucky retirement taxes
- Social Security: Not taxable
- Pensions: Partially Taxable
- 401(k) and IRA Distributions: Taxable
- Railroad Retirement benefits are also exempt from tax in Kentucky.
Note: A $31,110 deduction is available in Kentucky for state, private and military retirement plans.
Kentucky sales tax
Kentucky's state sales tax rate is 6%. There are no local taxes in the state.
Groceries: Exempt
Clothing: Taxable
Motor Vehicles: Exempt if 6% motor vehicle usage tax is paid
Prescription Drugs: Exempt
How much are property taxes in Kentucky?
In Kentucky, the average property tax paid is 0.74% per assessed home value, according to the Tax Foundation.
Kentucky Property Tax Breaks for Retirees
For homeowners 65 and older, $49,100 of the assessed value of residential property is exempt from Kentucky taxes for 2024.
Kentucky gas tax
Product | Tax Amount |
---|---|
Gasoline | $0.25 per gallon |
Diesel | $0.22 per gallon |
Source: The Sales Tax Handbook
Kentucky taxes on alcohol and tobacco
Kentucky tobacco taxes
Product | Tax Amount |
---|---|
Cigarettes | $1.10 per pack of 20 |
Snuff | $0.19 per unit of 1.5 ounces |
Other tobacco products | 15% of wholesale price |
Source: The Sales Tax Handbook
Kentucky alcohol taxes
Product | Tax |
---|---|
Beer | $0.08 per gallon |
Wine | $0.50 per gallon |
Liquor | $1.92 per gallon |
Note: A 10.75% sales tax is also charged at the wholesale level.
Source: The Sales Tax Handbook
Kentucky 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).
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

As the senior tax editor at Kiplinger.com, Kelley R. Taylor simplifies federal and state tax information, news, and developments to help empower readers. Kelley has over two decades of experience advising on and covering education, law, finance, and tax as a corporate attorney and business journalist.
-
Actively Managed Portfolios: What Are They and How Do They Work?
SPONSORED Don't settle for a robo advisor.
-
The Emotional Side of Retiring: Six Steps to Help You Move On
Getting mentally ready for retirement can be tough. The loss of your work identity, daily connections, and sense of purpose can make the transition difficult. Here are six steps to help you adjust.
-
Stay NJ Could Give You $6,500: The Deadline You Can't Miss
Property Taxes New Jersey has a new property tax relief program for 2025. But the application deadline is fast approaching.
-
Social Security 2025: The Outdated Tax Rules Costing Retirees Money
Retirement Taxes Could the Social Security 90th anniversary be a good time to revisit old tax thresholds?
-
How the 2025 Child Tax Credit Rules Impact Single Parents
Tax Credits New changes to family tax credits, like the Child Tax Credit, will impact the eligibility of some households.
-
The Fall Garden Tax? What to Plant and How to Prepare
Tax Tips Fall gardening could increase your taxes this season. Here’s what to know while planting in 2025.
-
Texas Sales Tax-Free Weekend 2025
Tax Holiday Here's what you needed to know about the Texas sales tax holiday.
-
Retirees Should Watch These Four Key Tax Changes in 2025
Tax Changes This year brings key tax changes that could affect your retirement taxes and income.
-
The Most Tax-Friendly State for Retirement in 2025: Here It Is
Retirement Tax How do you retire ‘tax-free’? This state doesn’t tax retirement income, has a low median property tax bill, and even offers savings on gas. Are you ready for a move?
-
Virginia Tax-Free Weekend 2025 Is Here August 1–3: What to Know
Sales Tax Three days, no sales tax. Here’s what qualifies for Virginia’s tax-free weekend.