The state of Kentucky collects taxes by variable rates, the chat below will help explain some of the income taxed and the amount of tax collect on that income.
- The first $3,000 in income is taxed at a rate of 2%
- Income from $3,001 to $4,000 is taxed at a rate of 3%
- Income from $4,001 to $5,000 is taxed at a rate of 4%
- Income from $5,001 to $8,000 is taxed at a rate of 5%
- Income from $8,001 to $75,000 is taxed at a rate of 5.8%
- Any income over $75,001 is taxed at a rate of 6%
Social Security benefits are not taxed in Kentucky.
Retirement Income Exemptions
If you receive retirement benefits from railroad income you are exempt from state taxes. If you have retirement income up to $41,110 you may be excluded from paying taxes this includes monies distributed from IRAs, 401(k) plans, private pensions as well as annuities. If you receive a pension from military service, civil service, or a state or local government you may qualify for additional exclusions.
You are considered a resident of Kentucky if you hold a domicile on the last day of the tax year in the state, this includes person who spend over 183 days in Kentucky and hold a place of residence in the state. All other persons are considered nonresidents.
The state of Kentucky holds a reciprocal tax agreement with the following states; Indian, Illinois, Michigan, Ohio, Virginia, West Virginia and Wisconsin. This means that any income earned in the state of Kentucky by residents of the above states are exempt from paying state income tax. If you are a resident of Kentucky and earn income in one of the reciprocal states you are exempt from paying state income tax to the state in which you are employed. For residents who work in Virginia, this only applies if you commute daily to your place of employment in the non-resident state.
