Kentucky taxes

Kentucky taxes personal income at a flat 4%. A sole proprietor owes no separate business tax. Every business that Kentucky law shields from liability, from a one-person LLC to a corporation, owes the limited liability entity tax (LLET), at least $175 a year whatever it earned. C corporations also pay 5% corporate income tax.

Personal income tax

Kentucky residents file Form 740. The rate is a flat 4% for every filing status. The standard deduction is $3,270, and a married couple filing jointly gets only one, not one each.

Kentucky has no personal exemption. It uses tax credits instead, including credits for being 65 or older, blind, or in the Kentucky National Guard. It does not tax Social Security, and it excludes up to $31,110 of pension and annuity income per person.

Lower incomes may qualify for the family size tax credit, which can cancel the tax entirely. It reaches incomes up to 133% of a threshold set by family size: $15,650 for one person, rising to $32,150 for four or more.

Return

Form 740

Rate

4% for every filing status

Standard deduction

$3,270 per return, so only one on a joint return

Personal exemption

None. Kentucky gives tax credits instead

Pension and annuity exclusion

Up to $31,110 per person

Not taxed

Social Security

Family size tax credit thresholds

$15,650 for one person, $21,150 for two, $26,650 for three, $32,150 for four or more

Sole proprietor

A sole proprietor with no LLC owes Kentucky nothing at the business level. The LLET only reaches businesses that Kentucky law protects from liability, so there is no $175 minimum, no Form 725, and no annual report.

Your business profit is taxed on your own Form 740, at the personal rate above.

Single-member LLC

Kentucky has a return made for this exact business: Form 725, for a single-member LLC owned by an individual. Filing it is required by law even though the IRS ignores the LLC for income tax. The LLC owes the LLET, at least $175 a year whatever it earned, and an LLC with $3,000,000 or less of gross receipts or gross profits pays exactly that. It is due April 15 for a calendar year.

There is also a $15 annual report, filed with the Secretary of State rather than the Department of Revenue, due June 30. The LLC's profit is taxed on your own Form 740.

Partnership

A Kentucky partnership files Form PTE, the Kentucky pass-through entity return. The profit passes through to the partners, who report it on their own returns.

A partnership that Kentucky law shields from liability, such as an LLC or a limited partnership, also owes the LLET. The least it can be is $175, owed whether or not there was a profit, and it grows once receipts pass $3,000,000.

Kentucky makes a pass-through business withhold Kentucky tax at its highest individual rate on each nonresident owner's share, whether or not the money was paid out. It is filed on Form 740NP-WH by the 15th day of the fourth month after the tax year ends. An owner who filed a Kentucky return the year before can be excused. The amount is not worked out here, because it needs each owner's residence and share.

S corporation

A Kentucky S corporation files Form PTE, the Kentucky pass-through entity return. The profit passes through to the shareholders, who report it on their own returns.

The S corporation still owes the LLET, at least $175 a year whether or not there was a profit, and more once receipts pass $3,000,000.

Kentucky makes a pass-through business withhold Kentucky tax at its highest individual rate on each nonresident owner's share, whether or not the money was paid out. It is filed on Form 740NP-WH by the 15th day of the fourth month after the tax year ends. An owner who filed a Kentucky return the year before can be excused. The amount is not worked out here, because it needs each owner's residence and share.

C corporation

A C corporation files Form 720 and pays corporate income tax at 5% of its Kentucky taxable income. A corporation selling into other states counts only its Kentucky share, measured by Kentucky sales over total sales.

It owes the LLET on top. The LLET is the lesser of 0.095% of Kentucky gross receipts and 0.75% of Kentucky gross profits, never less than $175, phasing in between $3,000,000 and $6,000,000. Only the part above $175 can be credited against the income tax, so the $175 is a real cost. Public Law 86-272 does not protect against it.

Return

Form 720

Corporate income tax

5% of Kentucky taxable income

Multi-state profit

Kentucky sales over total sales

Limited liability entity tax

The lesser of 0.095% of gross receipts and 0.75% of gross profits, at least $175

Estimate your state tax

Pick your business type and enter this year's numbers to see the state business tax Kentucky charges. It assumes all your sales are in Kentucky.

An estimate for planning, not tax advice.

Sources

• Kentucky Form 740, 2025
• Kentucky Form 740-NP Packet Instructions, 2025
• revenue.ky.gov 2025 Form 720, Schedule L and Part II: the LLET and its $175 minimum
• revenue.ky.gov Form 720 Instructions (KRS 141.0401)
• revenue.ky.gov Form 720 Instructions: the 5% corporation income tax rate (KRS 141.040) and single sales factor apportionment
• revenue.ky.gov 2025 Form 720, Schedule L: the LLET computation, its $3,000,000 and $6,000,000 steps and the $175 minimum (KRS 141.0401)

Last reviewed August 2026.