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.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
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 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.
-
Three Critical Tax Changes Could Boost Your Paycheck in 2026Tax Tips The IRS predicts these tax breaks may change take-home pay in 2026. Will you get over $1,000 in tax savings?
-
Trump’s 2025 Tax Bill: What’s Changing and How It Affects Your TaxesTax Law From standard deduction amounts to tax brackets and Medicaid cuts, here’s what individual filers need to know about tax changes in Trump's so called "big beautiful bill."
-
The Rubber Duck Rule of Retirement Tax PlanningRetirement Taxes How can you identify gaps and hidden assumptions in your tax plan for retirement? The solution may be stranger than you think.
-
RMDs, Roth, and SS: Test Your Knowledge of Retirement Tax RulesQuiz Don't let the IRS catch you off guard. Take our quiz to reveal common retirement tax rules that could save (or cost) you thousands.
-
What’s the New 2026 Estate Tax Exemption Amount?Estate Tax The IRS just increased the exemption as we enter into a promising tax year for estates and inheritances.
-
IRS Updates 2026 Tax Deduction for People Age 65 and OlderTax Changes Adjustments to the extra standard deduction can impact the tax bills of millions of older adults. Here are some new amounts to know for 2026.
-
IRS Reveals New 2026 Child Tax Credit and other Family Credit AmountsTax Credits Key family tax breaks are higher for 2026, including the Earned Income Tax Credit and the Adoption Credit. Here's what they're worth.
-
Standard Deduction 2026 Amounts Are HereTax Breaks What is the standard deduction for your filing status in 2026?

