Kentucky Paycheck Calculator (2026)

Kentucky's flat rate fell from 4% to 3.5% on January 1, 2026, the third half-point cut under a 2022 trigger law that lets the legislature ratify a reduction whenever revenue and reserve targets are met. The state missed the triggers for a further cut to 3% in 2027 by about $7.5 million, so 3.5% will hold for at least two years. The standard deduction is $3,360, and unusually it is not doubled for married couples filing jointly, which is why many Kentucky couples file separately on their state return.

Local occupational license taxes are a bigger deal in Kentucky than in most states. Most cities and counties charge one, withheld from wages for work performed inside the jurisdiction, and city and county levies can stack. Louisville Metro charges 2.2% for residents and 1.45% for nonresidents; Lexington-Fayette charges 2.25% for everyone. Statewide the average works out to about 0.9% of income, and none of it is included in the estimate above.

Kentucky has reciprocity with Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia and Wisconsin, so a Cincinnati resident working in Covington pays only Ohio income tax (though Covington's occupational tax still applies). Retirees can exclude up to $31,110 of pension and retirement income, and Social Security is exempt. Sales tax is 6% with no local additions.