Kentucky Tax Guide
Explore Kentucky's 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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free 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 took effect as of 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% (0.73% in 2026) 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 2025 and 2026.
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 |
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
-
4 High-End Experiences Worth the Splurge After 50These curated date ideas provide the perfect backdrop for couples ready to enjoy the very best that the world has to offer.
-
Health Care Stocks Have Sagged. Can You Bet on a Recovery?The flagging health care sector has perked up a bit lately. Is it time to invest?
-
Costco's Auto Program: Can Membership Pricing Really Save You Money on a Car?Costco's Auto Program can simplify the car-buying process with prearranged pricing and member perks. Here's what to know before you use it.
-
2026 Tax Refund Delays: 5 States Where Your Money Is StuckState Tax From New York to Oregon, your state income tax refund could be delayed for weeks. Here's what to know.
-
How One Extra Dollar of Income Can Cost You Thousands in RetirementRetirement Even modest changes in retirement income can raise Medicare premiums under IRMAA. Here’s how a small increase can affect your retirement costs.
-
First the Penny, Now the Nickel? The New Math Behind Your Sales Tax and TotalRounding Tax A new era of "Swedish rounding" hits U.S. registers soon. Learn why the nickel might be on the chopping block, and how to save money by choosing the right way to pay.
-
Trump Tariffs Supreme Court Ruling: What's Next for Consumers and RetailersTax Law This landmark decision will reshape U.S. trade policy and could define the outer boundaries of presidential economic power for years to come.
-
Over 65? Here's What the New $6K Senior Tax Deduction Means for Medicare IRMAATax Breaks A new tax deduction for people over age 65 has some thinking about Medicare premiums and MAGI strategy.
-
U.S. Congress to End Emergency Tax Bill Over $6,000 Senior Deduction and Tip, Overtime Tax Breaks in D.C.Tax Law Here's how taxpayers can amend their already-filed income tax returns amid a potentially looming legal battle on Capitol Hill.
-
How to Open Your Kid's $1,000 Trump AccountTax Breaks Filing income taxes in 2026? You won't want to miss Form 4547 to claim a $1,000 Trump Account for your child.
-
In Arkansas and Illinois, Groceries Just Got Cheaper, But Not By MuchFood Prices Arkansas and Illinois are the most recent states to repeal sales tax on groceries. Will it really help shoppers with their food bills?
