Kentucky State Income Tax

New laws are taking effect in Kentucky, including a reduction of the state’s income tax from 4.5% to 4% in 2024. The change comes as lawmakers and gubernatorial candidates debate the future of the commonwealth’s income tax, with some advocating for phasing it out completely. Others warn that doing so would blow a huge hole in the state’s budget and jeopardize public services like education, health care, and economic security programs. State budget director John Hicks recently sent a letter to lawmakers saying the fiscal requirements for another half-percent reduction were not met. That means Kentucky’s individual income tax will remain at 4% for 2024. But Hicks said the state has continued to meet other fiscal requirements and is on track for a further reduction in the future.

If you are behind on your taxes, the State of Kentucky will send you a Notice of Tax Due. If you don’t resolve the issue within a certain time frame, the Department of Revenue may forcibly collect your debt through a levy, which is a public claim against your property or assets. You’ll be notified if the State intends to collect your debt forcibly, but it is best to pursue a resolution before this happens. You can also hire a professional to represent you in this process.

Kentucky State Tax Forms

Kentucky tax forms are specific documents used to report income earned in Kentucky and calculate the tax liability owed. These forms vary by individual income type, business type, and residency status. Filing taxes accurately and on time is critical to avoid penalties and interest charges from the Kentucky Department of Revenue.

For individuals, the most commonly filed Kentucky tax form is Form 740. This form is used to report all income, deductions, and credits claimed by the individual. The form also includes a schedule that reports the amount of Kentucky tax withheld from wages. Form 740-EZ is a simplified version of Form 740 for those with a simple tax situation or who do not qualify for itemized deductions.

Businesses that earn income in the state of Kentucky must file Form 720, which is similar to the federal Form 1120. This form is used to report income, deductions, and credits for C Corporations, S Corporations, partnerships, and limited liability companies. Kentucky also has an occupational tax levied by counties and cities on business and personal income.

The state of Kentucky has a flat income tax rate of 5% and a statewide sales tax of 6%. It also has a property tax and inheritance tax. These rates are lower than national averages. In addition, the state offers numerous tax deductions for residents, including charitable donations and mortgage interest.