Kentucky tax deductions and write-offs (2026)

Partly. Kentucky lets each person exclude up to $31,110 of pension income, including military retired pay. Retirees who retired before Jan. 1, 1998 are fully exempt, and later retirees can exclude more based on their service before 1998 (Kentucky Schedule P). HB 192 (2025), which would have fully exempted military pensions and SBP from 2026, died in committee. HB 183 (2026) would raise the general exclusion to $41,110 from 2027 but had not passed when we checked. Other retirement income: Each taxpayer may exclude up to $31,110 of pension, annuity, and 401(k)/IRA income.

Partly. Each taxpayer may exclude up to $31,110 of pension, annuity, and 401(k)/IRA income.

No. Kentucky does not tax Social Security benefits; the federally taxable amount is subtracted on Schedule M. Statutory basis: KRS 141.019(1)(e).

No: Kentucky doesn't offer a state earned income credit. No state earned income tax credit as of tax year 2026. Kentucky does offer a child care credit: 20% of the federal child and dependent care credit. Nonrefundable.

Only instead of income tax: itemizers in Kentucky pick sales tax (6% state rate, about 6% with local taxes) or state income tax, whichever is bigger. A flat 6% with no local sales taxes; vehicles pay a separate 6% motor vehicle usage tax at titling or first registration.

Yes on your federal return if you itemize, within the $40,400 SALT cap. Kentucky adds its own break: $49,100 off assessed value for homeowners 65+ or totally disabled (2025-2026).

No: Kentucky doesn't offer a renter's credit or rent rebate. Kentucky has no state tax credit, deduction, or rebate specifically for renters. Kentucky's homestead exemption for seniors and people with disabilities applies only to homes the claimant owns and lives in. Renters who itemize federally can deduct sales tax (6% state rate, about 6% with local) or Kentucky income tax, whichever is bigger.

Partly: Kentucky's motor vehicle property tax is based on your vehicle's value, so it's deductible as personal property tax if you itemize. The county PVA assesses the vehicle's value as of January 1, and the tax is due by the end of your renewal month.

Kentucky's flat rate drops to 3.5% for 2026, many cities and counties add occupational taxes, and up to $31,110 of retirement income is excluded.

No: Kentucky doesn't offer a deduction or credit for 529 contributions. No deduction or credit for KY Saves 529; 2026 bills (HB 27, HB 131) to create one stalled in committee.

No state child tax credit, but Kentucky has a child care credit: 20% of the federal child and dependent care credit. Nonrefundable. A related break for older or lower-income homeowners: $49,100 off assessed value for homeowners 65+ or totally disabled (2025-2026).

Yes, as a business expense: Kentucky charges $40 to form an LLC; ongoing: $15 annual report. Limited Liability Entity Tax (LLET): $175 minimum; LLCs with gross receipts or gross profits of $3M or less pay $175. Annual report due Jan 1-June 30. LLET return due 15th day of 4th month after year end.