Kentucky is one of the states that underwent a tax revolution in 2018, making its tax rates much easier to follow and learn. Since 2018, the state has charged taxpayers with a flat income tax rate of 5%. In addition, taxpayers generating income in the state also have to pay local income taxes, which vary between 0.000075% and 2.50%.
If you are running a business that is selling products or services, and you generate your income through your business, then you will also have to pay the sales tax, which is 6%. Those who own property within borders will be charged 0.83% property tax on average as well.
On average, a taxpayer pays $1,257 in tax every year in in this state. Kentucky is a bit unique in terms of its tax system. The first one is local occupational taxes, collected from all businesses and individuals both as county and city taxes.
The second one is called the inheritance tax. Unfortunately, Kentucky is one of the rare states that charges tax on individuals on their inheritances. From retirement to homeownership and insurance to financial plans or investing, there are many elements that you need to consider when calculating your income tax.
Therefore, it may be a good idea to work with a financial advisor or tax professional to let them manage these on your behalf. It may not be a need for you if you are just an employer with limited income. On the other hand, if you are running a business and generating an income through that business, working with a professional can help you save in the long run.
Kentucky’s flat tax rate application is a bit different than the federal income tax, which is also considered a progressive tax system. In Kentucky’s tax system, everyone pays an equal tax on the total amount of their income. Of course, some additions or deductions must be calculated before figuring out the tax you owe.
This is why it is important to benefit from tools such as the Kentucky income tax calculator. However, it will be worth noting that these tools will only provide accurate results when you provide all the required information correctly.
In addition, most retirement income types are not taxable in the state, and social security benefits are also exempt. Moreover, active-duty military pay is also exempt in Kentucky, while the interest income you are going to generate from municipal bonds in different states is taxable.
Another important detail you need to know is whether you are running a business or not. You will have to pay personal income tax. In other words, business owners pay two taxes: one for their own income they generate from their company and one for their businesses unless they are not an S corporation business.
Kentucky Income Tax Calculator TaxUni
If you’re looking for a Kentucky income tax calculator, it’s a good place to start. This calculator can help you calculate your taxes by breaking down your income into taxable and nontaxable components. These amounts are based on the income tax tables for the state of Kentucky. The variables have been assumed for simplification purposes. This document should be used for approximate purposes only and is not legal advice. For more assistance, contact a qualified tax professional.