Personal income taxes

Taxable income

How is taxable personal income determined in your state?

A taxpayer’s adjusted federal gross income is used as the starting point for Kentucky’s entire net income, regardless of where it was earned. Then, there are certain additions or subtractions and deductions that result in a taxpayer’s Kentucky adjusted gross income (Kentucky Revised Statutes (KRS) 141.020).

Tax residence

Under what circumstances is an individual deemed resident in your state for personal income tax purposes?

KRS 141.010 defines ‘resident’ to mean “an individual domiciled within this state or an individual who is not domiciled in this state, but maintains a place of abode in this state and spends in the aggregate more than one hundred eighty-three (183) days of the taxable year in this state.” Accordingly, an individual may be a resident because the individual is a domiciliary of Kentucky, or the individual may be a statutory resident because the individual comes within the statutory test of residency—that is, has an abode and spends more than 183 days in the Commonwealth. 

Rates

What are the applicable personal income tax rates?

For tax years beginning on or after January 1 2018, the personal income tax is 5% (KRS 141.020).

Exemptions, deductions and credits

What exemptions, deductions, and credits are available?

Except for deductions for mortgage interest and charitable contributions, itemized deductions have been eliminated under House Bill 487. Pension income is excluded up to $31,110 per person. Taxpayers who pay taxes in a state other than Kentucky on non-Kentucky-sourced income are entitled to a credit against their Kentucky income tax for the amount paid to another state. There are many other tax credits against the income tax, including the limited liability entity tax credit, the Kentucky Business Investment Act credit, and the recycling/composting equipment credit. A list may be found on Kentucky Department of Revenue Form 740, page 2, on line 30 and in Section A.

Filing requirements

What filing requirements and procedures apply?

Kentucky individual income taxes are generally imposed based on each taxpayer’s tax year, which is generally a calendar year, with the annual tax return being due on the 15th day of the fourth month following the close of the fiscal year (i.e., April 15 for calendar year taxpayers), unless extended for up to six months (KRS 141.160 and 141.170).

Employer obligations

What obligations are imposed on the employer in relation to the collection and remittance of state personal income taxes (eg, withholding)?

Generally, every employer must deduct and withhold from wages a tax as determined by tables created by the Kentucky Department of Revenue.