Kentucky State Tax Guide

Kentucky state tax rates and rules for income, sales, property, fuel, cigarette, and other taxes that impact residents.

Kentucky state flag for Kentucky state tax guide
(Image credit: Getty Images)

Kentucky State Tax: Overview

Kentucky has a flat personal income tax rate, some local additional taxes on wages, and an inheritance tax. However, the Bluegrass State prevents local governments from adding to the state's comparatively modest sales tax rate. 

The property tax burden has also typically been low on average compared to other states.

[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.] 

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Kentucky Income Taxes

Kentucky generally has a flat income tax rate of 4.5%. 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.

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

  • Social Security benefits are not taxed by the state.
  • Up to $31,110 of income from private, government, and military retirement plans (including IRAs and 401(k) plans) is exempt. However, government retirement income attributable to service credits earned before 1998 is fully exempt without limits.
  • Railroad Retirement benefits are also exempt from tax in Kentucky.

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

What are Property Taxes in Kentucky?

In Kentucky, the average property tax paid is .83% per assessed home value, according to the Tax Foundation.

Kentucky Property Tax Breaks for Retirees

For homeowners 65 and older, $40,500 of the assessed value of residential property is exempt from state taxes for 2021 and 2022. The exemption amount goes up to $46,350 for 2023 and 2024.

Kentucky Gas (Motor Fuels) Tax

  • Gasoline: is taxed at 28.7 cents per gallon in Kentucky.
  • Diesel: About 26¢ per gallon.

Kentucky Taxes on Alcohol and Tobacco

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Cigarettes: $1.10 per pack of 25
Snuff$0.19 per unit of 1.5 ounces
Chewing tobaccoApproximately $0.19 for a single unit (net weight less than 4 ounces sold)
Other tobacco products15% of the wholesale price
Vapor products$1.50 per cartridge for closed system, 15% of the wholesale price for other products

Source: Kentucky Department of Revenue

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Beer$0.08 per gallon
Wine$0.50 per gallon
Liquor$1.92 per gallon

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).
Rocky Mengle

Rocky Mengle was a Senior Tax Editor for Kiplinger from October 2018 to January 2023 with more than 20 years of experience covering federal and state tax developments. Before coming to Kiplinger, Rocky worked for Wolters Kluwer Tax & Accounting, and Kleinrock Publishing, where he provided breaking news and guidance for CPAs, tax attorneys, and other tax professionals. He has also been quoted as an expert by USA Today, Forbes, U.S. News & World Report, Reuters, Accounting Today, and other media outlets. Rocky holds a law degree from the University of Connecticut and a B.A. in History from Salisbury University.

With contributions from