Kentucky Tax Guide 2025

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

Kentucky state flag for Kentucky state tax guide
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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.

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.

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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

Capitol Building of the Commonwealth of Kentucky

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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.

  • 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

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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?

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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

rendering of a yellow car against a yellow background

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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

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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

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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).

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Kelley R. Taylor
Senior Tax Editor, Kiplinger.com

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.