Taxes in Kentucky

Kentucky lowered its income tax rate in 2023 but expanded its sales tax to include 34 more service categories. Below, we explain various Kentucky state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes.

For information regarding taxes in other states, see Retirement Taxes by State.

Kentucky Tax Rates

State Sales Tax	6%
Avg State/Local Sales Tax	6%
Gas Tax	$0.30 per gallon
Diesel Tax	$0.26 per gallon
Cigarette Tax	$1.10 per pack
Income Tax	4%
Effective Tax Rate:	4%
Property Tax	0.74%
Social Security Tax	None
Medical/Dental Deduction:	None
Federal Income Tax Deduction:	None
Retirement Tax	Partial

Kentucky State Taxes Explained

Kentucky Sales Tax

6%. Kentucky does not levy a local tax. Effective January 2023, the state imposed a sales tax on vehicle rentals, peer-to-peer car-sharing rentals, taxicabs, and limousine services, among others. In 2024, the state introduced a 3% tax on electric vehicle power and electric vehicle registration. In 2025, Kentucky will increase the electric vehicle registration fee and expand taxation on additional transportation services.

Kentucky Income Taxes

A flat rate of 4%.

Kentucky Property Taxes

Kentucky’s effective average property tax rate is 0.74%, or $1,549 on the average assessed home value of $209,367.

Kentucky has a Homestead Exemption on the assessed value of a qualifying single-unit residential property. This tax break is adjusted every two years based on the cost of living index. Homeowners aged 65 and older or classified as totally disabled by a federal or state agency may be eligible. Visit the Kentucky Homestead Exemption page for more information.

Kentucky Retirement Taxes

As of 2025, Kentucky exempts all Social Security and Roth IRA distributions from state income tax. The state also allows an exclusion of up to $31,110 for income from state, private, and military retirement plans. Military retirement pay is treated the same as other retirement income, permitting an exclusion of up to $31,110 on the Kentucky tax return. Legislation has been proposed to increase this exclusion to $41,110 for taxable years beginning on or after January 1, 2026.

Kentucky Estate and Inheritance Taxes

Kentucky has no estate tax. The inheritance tax is assigned to one of three classes.

• Class A beneficiaries are closest relatives (spouse, parent, child, grandchild, brother and sister). These individuals pay no tax.
• Class B beneficiaries are nieces, nephews, half-nieces, half-nephews, daughters-in-law, sons-in-law, aunts, uncles and great-grandchildren. The inheritance tax rate ranges from 4% to 16%, depending on the value of the inherited property. Kentucky excludes the first $1,000 of property value from inheritance tax.
• Class C individuals are all relatives not otherwise classified, including nieces and nephews by marriage and great-nieces and great-nephews. These heirs are taxed 6% to 16% on property received with a $500 exclusion.

For more information, see the Guide to Kentucky Inheritance or visit the Kentucky Department of Revenue.