What is Kentucky Income Tax? Rates & Tax Brackets

Updated for tax year 2025.

If you live or work in Kentucky, you’ll likely need to file a Kentucky state income tax return along with your federal return. Kentucky uses a flat income tax rate on Kentucky taxable income, and some Kentucky cities and counties also levy local occupational taxes on wages and business income.

This guide explains Kentucky’s 2025 income tax rate, standard deduction, available exclusions and credits, and updates for the current tax year. When you’re ready to file, TaxAct® automatically applies Kentucky’s tax rules to help you accurately prepare your Kentucky return alongside your federal return.

What is the Kentucky state income tax?

Kentucky state income tax is a tax on income earned by individuals. It is collected by the Kentucky Department of Revenue and helps fund state services.

For tax year 2025, Kentucky’s individual income tax rate is a flat 4% on Kentucky taxable income. Kentucky residents are generally taxed on income from all sources, subject to Kentucky additions, subtractions, and credits on Form 740. Nonresidents and part-year residents report Kentucky-source income on Form 740-NP.

Kentucky income tax rates and tax brackets

Kentucky does not use graduated income tax brackets. For tax year 2025, all Kentucky taxable income is taxed at a single flat rate regardless of filing status:

Filing Status	2025 State Tax Rate
Single	4%
Married filing jointly	4%
Married filing separately	4%
Head of household	4%

If you need more information on how federal tax brackets work, you can use our tax bracket calculator for federal taxes. See the 2025 Kentucky Form 740 instructions for official rate information.

Kentucky standard deduction

Kentucky allows a standard deduction or itemized deductions on Form 740, whichever provides the greater tax benefit. For tax year 2025, Kentucky’s standard deduction is $3,270 for all filing statuses. Kentucky does not vary the standard deduction amount by filing status the way the federal return does.

If one spouse itemizes deductions on a combined return, the other spouse must also itemize. See the Kentucky Department of Revenue standard deduction announcement and Form 740 instructions for current amounts and itemizing rules.

Kentucky exemptions and credits

Kentucky does not offer a separate personal exemption amount. Instead, Kentucky provides subtractions from federal adjusted gross income, a pension income exclusion, and credits that can reduce your Kentucky tax. Examples include:

Active-duty military pay — exempt from Kentucky income tax for active-duty members of the Armed Forces, reserves, and National Guard
Social Security benefits — exempt from Kentucky income tax
Pension and annuity income exclusion — up to $31,110 per taxpayer of qualifying pension and retirement income (100% of taxable retirement benefits or $31,110, whichever is less)
Interest on U.S. government obligations — exempt Kentucky income tax on interest from U.S. government bonds and securities

Retirement benefits from the Commonwealth of Kentucky, Kentucky local government systems, the federal government, and military plans may qualify for additional exclusions under Schedule M and Schedule P. Eligibility depends on the type of retirement income and when you retired. See the Kentucky individual income tax page and Form 740 Schedule M instructions for worksheets, limits, and Schedule P requirements.

Kentucky tax changes for 2025

For tax year 2025, Kentucky’s individual income tax rate remains 4%, unchanged from 2024. The Kentucky standard deduction increased to $3,270 for 2025, up $110 from the 2024 amount of $3,160.

Kentucky law conforms to the Internal Revenue Code as of December 31, 2024 (updated by HB 775). Federal tax changes enacted after that date do not automatically apply on your Kentucky return. For example, Kentucky does not allow federal deductions for qualified tips, overtime income, or car loan interest under recent federal law. Kentucky also has its own rules for bonus depreciation and Section 179 expense deductions that can differ from federal treatment.

Kentucky legislation enacted in 2025 set the individual income tax rate to decrease to 3.5% effective January 1, 2026. See the 2025 Form 740 instructions for a full list of current Kentucky tax rules.

FAQs

Does Kentucky have a state income tax?

Yes, Kentucky has a state income tax. For tax year 2025, Kentucky taxes Kentucky taxable income at a flat 4% rate. Some Kentucky cities and counties also levy separate local occupational taxes.

What is the Kentucky income tax rate?

Kentucky’s individual income tax rate for 2025 is a flat 4% on Kentucky taxable income. The same 4% rate applies regardless of filing status or income level.

What are the Kentucky income tax brackets for 2025?

Kentucky does not use graduated income tax brackets for 2025. All Kentucky taxable income is taxed at the flat 4% rate. See the Kentucky income tax rate table above.

How does Kentucky state income tax work?

Kentucky state income tax generally starts with your federal adjusted gross income, adds Kentucky additions and subtracts Kentucky subtractions on Schedule M to arrive at Kentucky adjusted gross income, then subtracts your standard deduction or itemized deductions to determine Kentucky taxable income. You apply the 4% rate and subtract available Kentucky credits to determine your final liability.

Do I have to file a Kentucky state tax return?

You may need to file a Kentucky return if you are a Kentucky resident whose modified gross income and Kentucky adjusted gross income exceed Kentucky filing thresholds based on family size, age, and blindness status, or if you have self-employment income above certain limits. Nonresidents and part-year residents with Kentucky-source income may also need to file Form 740-NP. Check Kentucky Department of Revenue guidance for your situation.

What is the Kentucky standard deduction for 2025?

Kentucky’s standard deduction for 2025 is $3,270 for all filing statuses. You may itemize instead if that provides a larger deduction, but if one spouse itemizes on a combined return, both spouses must itemize.

How much is Kentucky state income tax?

There isn’t one Kentucky state income tax amount that applies to everyone. How much you owe depends on your Kentucky taxable income, whether you use the standard deduction or itemize, which Kentucky subtractions and credits you qualify for, and any local occupational taxes in your city or county. For 2025, the state rate is 4% on Kentucky taxable income.

Why is my Kentucky tax return different from my federal return?

Kentucky conforms to the Internal Revenue Code as of December 31, 2024, not on a rolling basis, so recent federal tax law changes may not automatically apply to your Kentucky return. Kentucky also has its own subtractions and credits — such as the pension income exclusion, military pay exclusion, and Social Security exemption — and different rules for bonus depreciation and Section 179 deductions that can make your Kentucky taxable income and tax liability different from your federal return.

The good news is that our tax software automatically applies Kentucky’s current tax rules when preparing your state return, so you don’t have to calculate these differences yourself.

For more information, visit the Kentucky Department of Revenue. If you’d like to learn more about recent federal tax law changes, see our OBBB tax changes guide.

The bottom line

Kentucky’s 2025 income tax applies a flat 4% rate on Kentucky taxable income, with a $3,270 standard deduction for all filing statuses. Knowing which Kentucky subtractions and credits you may qualify for — and how Kentucky’s fixed-date IRC conformity differs from federal law — can help you estimate what you may owe or get back.

When you’re ready to file, TaxAct can help you prepare your federal and Kentucky returns in one place so you can file with confidence.

Already filed your taxes and waiting for your refund? Learn more about where your Kentucky state tax refund is.

This article is for informational purposes only and not legal or financial advice.

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The OBBB is now also being referred to by lawmakers as the Working Families Tax Cut Act. You may see one or both names used here, but they refer to the same set of tax changes.