Kentucky cuts income tax from 4% to 3.5%

Business Jan 10, 2026

Starting January 1, 2026, Kentucky is dropping its flat income tax rate from 4% to 3.5%.
Thanks to House Bill 1, signed by Governor Andy Beshear, workers and businesses across the state will keep more of their earnings—adding up to about $718 million in total annual savings.

What this means for you (and local businesses)

For a typical household earning the state's median income, this tax cut means saving around $323 a year without lifting a finger.
Small businesses like sole proprietorships and S corps also get a boost, sharing at least $97.6 million in yearly savings statewide.