Kentucky Taxes

Kentucky taxes every resident's entire net income at a flat 3.5% for taxable years beginning on or after January 1, 2026, down from 4% for 2024–2025 (KRS 141.020(2)(f), as amended by 2025 Ky. Acts ch. 1). Nonresidents pay the same rate on income from Kentucky sources. Further cuts are not automatic: each year the State Budget Director reports by September 5 whether the statute's revenue "reduction conditions" were met, and only then may the General Assembly vote to lower the rate for a later year; if it does not act, the 3.5% rate stays in place, as the statute directs for the taxable years beginning January 1, 2027 and January 1, 2028.

Kentucky's motor fuel tax rates were reduced effective July 1, 2026 to 25.0 cents per gallon on gasoline and on liquefied petroleum, and 22.0 cents per gallon on special fuels (including diesel), plus a Petroleum Environmental Assurance Fee of 1.4 cents per gallon — 26.4 cents per gallon in state charges on gasoline. Kentucky's gasoline tax is levied on the average wholesale price per gallon as determined under KRS 138.228. No gas-tax suspension is in effect in Kentucky as of November 2026. The 18.4-cent federal gasoline tax is extra.

No sales-tax holiday. Kentucky sales and use tax is 6% of gross receipts or purchase price, and there are no local sales and use taxes anywhere in the state.

Real property in Kentucky is assessed by county Property Valuation Administrators (PVAs) and taxed at the state real property rate (10.6 cents per $100 of value for 2025) plus local rates set by counties, cities, school districts, and special districts. Rates and exemptions (such as the homestead exemption) are administered locally.