Kentucky State Income Tax Withholding
Last Updated: January 2026
Overview
Kentucky imposes a flat state income tax rate on all taxable income. The state simplified its tax structure by moving to a single flat rate, making withholding calculations straightforward.
2026 Tax Rates
| Taxable Income | Rate |
|---|---|
| All taxable income | 3.5% |
Deductions and Exemptions
Standard Deduction: $3,360 (built into the withholding formula)
The standard deduction is automatically factored into Kentucky's withholding tables and formulas. No separate calculation is required.
Special Considerations
State W-4 Form
Kentucky accepts the federal Form W-4 for state withholding purposes. Employees may use Kentucky Form K-4 to claim additional exemptions or request additional withholding.
Local Occupational Taxes
Several Kentucky cities and counties impose local occupational taxes (sometimes called "payroll taxes" or "license fees"). These are separate from state income tax withholding:
- Lexington-Fayette Urban County: 2.25%
- Louisville Metro: 2.20%
- Various other localities: Rates vary
Employers must register with each locality where employees work and withhold the appropriate local tax in addition to state income tax.
Reciprocal Agreements
Kentucky has reciprocal agreements with the following states:
- Illinois
- Indiana
- Michigan
- Ohio
- Virginia
- West Virginia
- Wisconsin
Residents of these states working in Kentucky may claim exemption from Kentucky withholding by filing Form 42A809.
Supplemental Wages
Supplemental wages may be taxed at the flat 3.5% rate.