Kentucky charges a flat 4.0% state income tax in 2025, and it is scheduled to drop to 3.5% in 2026. But many Kentucky cities and counties add a local occupational (payroll) tax on top.
That local layer is the piece most take-home estimates miss, and in Louisville or Lexington it can rival the state tax itself. Here is how the flat state rate and the local add-on work on your paycheck. See your exact take-home with the free Kentucky paycheck calculator.
How Kentucky's income tax works
Kentucky applies a single 4.0% rate (2025) to your income after a $3,270 standard deduction per filer. There are no brackets to climb, and the rate is on a downward path: 4.0% in 2025 and 3.5% scheduled for 2026 as revenue triggers are met.
On top of the state rate, many Kentucky cities and counties levy a local occupational tax on wages, often 1% to 2.5% (Louisville / Jefferson County is around 2.2%, Lexington about 2.25%). We model the state tax only, so add your locality's rate to the figures below.
Your take-home on a $65,000 salary in Kentucky
Here is how a $65,000 salary breaks down for a single filer, using 2025 federal and FICA figures alongside Kentucky's a flat 4.0% income tax (falling to 3.5% in 2026), plus local taxes.
| Item | Annual |
|---|---|
| Federal income tax | $5,246 |
| FICA (Social Security + Medicare) | $4,973 |
| Kentucky income tax | $2,469 |
| Take-home pay | $52,313 |
| Percent of gross kept | 80.5% |
On a $65,000 salary a single filer owes about $2,469 in Kentucky state income tax and keeps roughly $52,313, or 80.5% of gross, before any local occupational tax. In Louisville or Lexington, add roughly 2% (about $1,300 a year), which narrows Kentucky's gap with no-tax Tennessee next door. Compare with Tennessee.
Local occupational taxes and a falling state rate
Kentucky's two things to watch are the widespread local occupational taxes, which can add 1% to 2.5% depending on where you work, and the scheduled state-rate cuts that keep trimming the flat rate (4.0% in 2025, 3.5% in 2026) toward zero if revenue targets hold.
Kentucky exempts a meaningful amount of retirement income and does not tax Social Security, so retirees generally pay less than workers do on the same income.
How to keep more of your Kentucky paycheck
A traditional 401(k) and HSA lower your Kentucky and federal taxable income together (and the HSA avoids FICA). Note that local occupational taxes are often levied on gross wages, so pre-tax contributions may not reduce that piece — check your city's rules.