Kentucky State Income Tax 2023 - 2024

If you are an individual who lives in Kentucky, you must pay state income tax. The Department of Revenue (DOR) collects this tax from employees and self-employed individuals.

Kentucky State Income Tax rate is 4.5%. If you were a resident of Kentucky for the entire tax year, you need to file Form 740: Individual Income Tax Return. If you weren’t a resident of Kentucky for the entire tax year, or if you lived in Kentucky but also earned income in another state, you need to file Form 740-NP: Nonresident or Part Year Resident. The state has partnered with the IRS to host Volunteer Income Tax Assistance sites, where taxpayers can receive free filing assistance. Kentucky taxpayers can find the closest site and schedule an appointment through the online system.

Those who need additional time to file their returns can file an extension using Form 740-EXT. However, it is important to remember that an extension only extends the deadline for filing, not paying. In order to avoid late fees, taxpayers must pay their taxes or submit a valid extension by the October deadline. If the employer is a C-corporation, it must file Form 720EXT, “Corporation/LLET Extension,” on or before the 15th day of the fourth month following the close of the taxable year. Pass-through entities must submit a Form K-1, “Employer’s Return of Kentucky Income Tax Withheld,” and payment with each quarter’s return.

Kentucky State Income Tax Exemptions

Kentucky State Income Tax Exemptions

Most forms of retirement income are taxable in Kentucky, but there are some exceptions. Social Security benefits are exempt, as is up to $31,110 of private or government pension and annuity income. Interest from federal bonds is also exempt, and active duty military pay is not taxable. In addition, state income tax does not apply to interest on student loans or municipal bonds.

If you owe tax in Kentucky, you can file an offer in settlement with the DOR or apply for financial hardship. However, the DOR has a very strict definition of financial hardship and will not grant relief if you are just financially inconvenienced by your tax bill. If you qualify, you can also set up monthly payments to pay your tax debt.

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