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.
-
What New Tariffs Mean for Car Shoppers
The Kiplinger Letter Car deals are growing scarcer. Meanwhile, tax credits for EVs are on the way out, but tax breaks for car loans are coming.
-
The Delightful Way to Protect Your Cognitive Health
You know the drill — protect your cognitive health by eating well, exercising and socializing. But this newfound way to boost brain health is pure pleasure.
-
Mississippi Tax-Free Weekend 2025 Is Here: What to Know Before You Shop
Tax Holiday Just in time for Prime Day, Mississippi is celebrating a tax holiday in July. Find out how you can save on back-to-school essentials.
-
Amazon Prime Day Deals? Sales Tax and Tariffs Can Increase Your Total Price
Sales Tax Amazon Prime Day 2025 can offer some opportunities to save, but this year, taxes and tariffs matter.
-
What to Know About New Medicaid Cuts: Is Your Local Hospital Closing Soon?
Tax Policy Trump’s ‘One Big Beautiful Bill’ is now law, and rural hospitals across the U.S. are on the chopping block.
-
Ten Cheapest Places to Live in Virginia
Property Taxes The Commonwealth of Virginia has some cheap places to live. Here are a few if you hate paying property taxes.
-
What's Happening With the New Jersey State Budget?
State Taxes The latest New Jersey tax laws include a new ‘mansion tax’ and Stay NJ payouts. Here’s what to know.
-
2025 SALT Cap Could Hurt Top 'Hidden Home Cost'
Tax Deductions The GOP tax bill could make hidden homeowner costs worse for you. Here’s how.
-
Treasury Deal Kills Trump’s ‘Revenge Tax’ After G7 Agreement
Tax Law A retaliatory tax that would have exposed U.S. jobs and retirement savings to risk is likely to be scrapped from Trump’s megabill.
-
Is Your State Coming For Your Online Sports Bets?
State Tax Several states are trying to hike sports betting tax rates in 2025. Here’s how it could affect you.