Calculate your 2026 Kentucky state income tax at the flat 3.5% rate (reduced from 4% in 2026). Includes Louisville and Lexington local occupational tax. KY rate reduction timeline.
Kentucky Flat Income Tax โ 3.5% (2026)
Kentucky simplified its tax code with a flat rate that has been declining since 2022. The 2026 rate of 3.5% applies to all income above the $3,160 standard deduction. There are no brackets โ just one straightforward rate.
Calculation Formula
KY Taxable Income = Gross Income โ Standard Deduction ($3,160)
KY State Tax = KY Taxable Income ร 3.5%
Local Tax = Gross Income ร Local Rate (varies by city/county)
Example: Louisville resident, $65,000
KY taxable: $65,000 โ $3,160 = $61,840
KY state tax: $61,840 ร 3.5% = $2,164
Louisville local tax: $65,000 ร 2.25% = $1,463
Total KY + local: $3,627 | Effective rate: 5.58%
Frequently Asked Questions
What is Kentucky's income tax rate in 2026?
Kentucky has a flat income tax rate of 3.5% for tax year 2026, reduced from 4% in 2026. This is part of Kentucky's ongoing rate reduction path under HB 8 (2022), which set a schedule to cut the rate each year the state meets revenue triggers. The path has been: 5% (2022) โ 4.5% (2023) โ 4% (2024-2026) โ 3.5% (2026). Further reductions are planned if fiscal conditions allow.
What is the Kentucky standard deduction?
Kentucky's standard deduction is $3,160 for 2026 (inflation-adjusted each year). This applies to all filing statuses โ Kentucky does not vary the standard deduction by filing status. There is no married filing jointly standard deduction benefit; spouses may file jointly but each uses the $3,160 deduction on combined income.
Does Kentucky have local income taxes?
Yes. Kentucky allows cities and counties to levy local occupational taxes. The most notable are Louisville Metro (Jefferson County) at 2.25% and Lexington-Fayette County at 2.25%. Many smaller cities and counties also levy taxes ranging from 0.5% to 2.5%. These are withheld separately from state tax and represent a significant additional burden for residents of larger cities.
Who must file a Kentucky income tax return?
Kentucky residents with income above $2,860 (2026) must file a state income tax return (Form 740). Part-year residents and nonresidents with Kentucky-source income must file Form 740-NP. Kentucky conforms to federal filing status and gross income definitions, with some modifications for Kentucky-specific deductions and credits.
How does Kentucky's flat tax compare to neighboring states?
At 3.5%, Kentucky's flat rate is lower than Ohio's top rate (3.75%), Indiana (3.15%), Tennessee and Virginia (5.75% top), West Virginia (6.5% top), and Illinois (4.95%). It is higher than Tennessee (0%) and Indiana is comparable. When local occupational taxes are included (Louisville/Lexington add ~2.25%), the combined burden rivals higher-rate states with no local taxes.