How does Kentucky’s tax code compare? Kentucky has a flat 4.00 percent individual income tax rate. There are also jurisdictions that collect local income taxes. Kentucky has a 5.0 percent corporate income tax rate. Kentucky also has a 6.00 percent state sales tax rate and does not have local sales taxes. Kentucky has a 0.74 percent effective property tax rate on owner-occupied housing value.
Kentucky has an inheritance tax. Kentucky has a 30 cents per gallon gas tax rate and a $1.10 cigarette excise tax rate. The State of Kentucky collects $5,945 in state and local tax collections per capita. Kentucky has $12,020 in state and local debt per capita and has a 50 percent funded ratio of public pension plans. Overall, Kentucky’s tax system ranks 18th on our 2024 State Business Tax Climate Index.
Each state’s tax code is a multifaceted system with many moving parts, and Kentucky is no exception. The first step towards understanding Kentucky’s tax code is knowing the basics. How does Kentucky collect tax revenue? Click the tabs below to learn more! You can also explore our state tax maps, which are compiled from our annual publication, Facts & Figures 2024: How Does Your State Compare?
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Individual income taxes are a major source of state government revenue, accounting for 37 percent of state tax collections in fiscal year (FY) 2017. Several states had notable individual income tax changes in 2020: Arizona, Arkansas, Massachusetts, Michigan, Minnesota, North Carolina, Ohio, Tennessee, Virginia, and Wisconsin.
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States compete with each other in a variety of ways, including in attracting (and retaining) residents. Sustained periods of inbound migration lead to (and reflect) greater economic output and growth. Prolonged periods of net outbound migration, however, can strain state coffers, contributing to revenue declines as economic activity and tax revenue follow individuals out of state.
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While many factors influence business location and investment decisions, sales taxes are something within lawmakers’ control that can have immediate impacts.
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