Individual Income Tax

• Kentucky taxes its residents on all earned income. Kentucky also taxes nonresidents who earn income from sources in Kentucky. The individual income tax is modeled after the federal income tax. Accordingly, it is a progressive tax, meaning the more income a person makes, the higher percentage tax rate that person pays. Individual income tax rates range from two to six percent and provides for itemized deductions. Chapter 141 of the Kentucky Revised Statutes governs individual income tax laws.
  
  

Corporate Income Tax

• Incorporated businesses in Kentucky pay corporate income tax to the Commonwealth. This tax applies to "C-Corporations." Businesses that elect to be taxed under Internal Revenue Code subchapter S and limited liability companies do not pay corporate income tax. Corporate income tax in Kentucky is three- tiered. The first $50,000 is taxed at four percent. The next $50,000 is taxed at five percent. Finally, any income in excess of $100,000 is taxed at six percent.
  
  

Property Tax

• Kentucky levies tax on all real property and tangible property based on the fair market value of the property. This tax includes assessments on, among other things, homes, land, leases, mobile homes, natural resources, vehicles, aircraft and inventory. In Kentucky, the average tax rate for real estate property is 26.8201 percent. For tangible property, the average rate is 36.4665 percent. Finally, the average rate for motor vehicles is 24.0139 percent.
  
  

Sales and Use Tax

• Kentucky levies taxes against the sale of gross receipts of products sold in Kentucky. Use tax applies to products purchased an out-of-state source. The Commonwealth applies a six percent sales and use tax rate to consumer transactions. Business owners must collect the tax on behalf of the Commonwealth and file and pay the taxes with the Kentucky Department of Revenue. Unlike many states, local county governments in Kentucky cannot impose additional sales taxes.
  
  

Inheritance and Estate Tax

• Chapter 140 of the Kentucky Revised Statutes governs the inheritance and estate tax, which are two different taxes. The inheritance tax applies to a decedent's estate upon disbursement of the estate's assets. The estate tax applies when federal estate tax credit exceeds the Kentucky inheritance tax. In other words, the estate tax is like a minimum tax for an estate that is not required to pay an inheritance tax. Both taxes are based on the fair market value of the disbursed property.
  
  

Warning

• Consult an attorney or tax professional to be sure of the obligations that you or your business is subject to with regard to Kentucky taxes.