Kentucky has a flat 4% state income tax — down from 5% just four years ago. See exactly what you take home after all federal and state taxes.
Kentucky dropped from 5% (2022) to 4.5% (2023) to 4% (2024), with potential future cuts to 3.5% built into state law if revenue triggers are met. The standard deduction is $3,160 (single) / $6,320 (married). Social Security benefits are fully exempt from Kentucky income tax.
Kentucky has been on one of the most aggressive income tax reduction paths in the South. The rate was 5% in 2022, dropped to 4.5% in 2023 with the passage of House Bill 8, then to 4% in 2024. The legislation built in a mechanism for further reductions: the rate drops another 0.5 percentage point (toward 3.5%) for each year in which Kentucky's general fund revenues exceed 2% growth. A Kentucky worker earning $60,000 in 2026 pays approximately $2,400 less in state income tax than they did under the 2022 rate — a meaningful real-dollar change that competes directly with neighboring Tennessee and Indiana.
Kentucky exempts Social Security benefits and provides a $41,110 pension income exclusion. This covers most public employee pensions, military retirement pay, and many private pensions in their entirety. A retiree receiving $40,000 in pension income pays zero Kentucky state income tax on those funds. For comparison, Wisconsin partially taxes Social Security, Minnesota taxes it significantly above certain income thresholds, and Missouri only partially exempts it. Kentucky's retirement income treatment makes it substantially more favorable for retirees than its income tax rate alone suggests.
Louisville and Lexington add local occupational taxes that are separate from the state rate. Louisville-Jefferson County charges a 1.25% occupational license fee on wages earned within the county; Lexington's Fayette Urban Government charges 2.25%. A Louisville worker's effective state+local income tax rate is 5.25%, not 4%. Many smaller Kentucky cities also have occupational fees of 1–2%. Workers who live in one jurisdiction but work in another often owe both the residence city's fee and the work city's fee (with a credit in some cases). Check your specific city's rules.
Compared to immediate neighbors: Indiana workers pay 3.05% plus county tax (often 0.5–3%), making some Indiana workers' total rate close to Kentucky's. Tennessee has zero income tax on wages (a major advantage, especially for Nashville corridor workers). Ohio dropped to a near-flat 2.75% for most earners after recent reforms. Kentucky at 4% flat is not the lowest option in the region, but the directional trend — and the retirement exemptions — make it more competitive than the raw rate comparison implies.
Estimates only. KY flat rate: 4%. Standard deduction: $3,160 (single) / $6,320 (married). Does not include local occupational taxes (Louisville 1.25%, Lexington 2.25%, etc.). Consult a tax professional for advice.
| Gross Pay (this check) | $0.00 |
| Federal Income Tax | −$0.00 |
| Kentucky State Tax (4%) | −$0.00 |
| Social Security (6.2%) | −$0.00 |
| Medicare (1.45%) | −$0.00 |
| Net Take-Home Pay | $0.00 |
Kentucky has a flat 4% state income tax rate for 2026. This applies to all income after the standard deduction of $3,160 (single) or $6,320 (married filing jointly). The rate was 5% as recently as 2022 and has been reduced annually. Further reductions to 3.5% are possible if Kentucky's revenue growth triggers are met in future years.
Kentucky workers pay four taxes on each paycheck: federal income tax (progressive brackets based on your W-4), Kentucky state income tax (4% flat after the standard deduction), Social Security (6.2% up to $184,500), and Medicare (1.45%). Workers in Louisville, Lexington, or other cities with occupational fees also pay local wage taxes — Louisville adds 1.25% and Lexington adds 2.25%.
Yes — many Kentucky cities and counties have an "occupational license fee" on wages. Louisville-Jefferson County charges 1.25%, Lexington charges 2.25%, and dozens of smaller cities have rates of 1–2%. These local taxes are separate from and in addition to the 4% state income tax. Workers who live in one jurisdiction and work in another may owe fees in both places, though some cities offer credits.
No. Kentucky fully exempts Social Security benefits from state income tax. Kentucky also provides a $41,110 pension income exclusion that covers most pension distributions, military retirement pay, and many other retirement income sources. For retirees, Kentucky's actual tax burden is often much lower than the 4% headline rate suggests.
Tennessee has zero income tax on wages — a major advantage for the Bowling Green and Hopkinsville corridor where many residents commute across the border. Indiana has a 3.05% flat rate, but most Indiana counties also add 0.5–3% local income tax, making the combined rate often comparable to or higher than Kentucky's 4% plus local fees. The key difference: Tennessee workers keep significantly more in take-home pay for the same income.
On a $65,000 salary paid biweekly ($2,500 per check), Kentucky withholds approximately $94–$98 per paycheck in state income tax. On $90,000 ($3,462 per check), it's approximately $132–$136 per paycheck. The flat 4% rate makes estimation straightforward — multiply your gross paycheck by about 3.8–4% (slightly less than 4% because the standard deduction is spread across pay periods).
Yes. The One Big Beautiful Bill (2026) exempts overtime premiums and tip income only from federal income tax. Kentucky still taxes overtime pay and tips at the standard 4% state rate. Use our Overtime Tax Calculator to see your federal savings and Tips Tax Calculator for the full federal + state picture.
Possibly. Kentucky House Bill 8 (2022) created a mechanism to reduce the rate by 0.5% per year as long as Kentucky's general fund revenues exceed 2% growth. If triggered, the rate would drop to 3.5% in a future year, with potential further cuts to 3% and beyond. The legislature has demonstrated willingness to cut, but the pace depends on state revenue performance year by year.