Kentucky retirement taxes at a glance (2026)
| State income tax | Flat 3.5%Kentucky has a flat 3.5% income tax for 2026; some localities add occupational taxes of 0.5% to 2.5%. |
|---|---|
| Social Security | Not taxedSocial Security benefits are fully exempt. |
| Pensions | Partly taxedUp to $31,110 of pension and retirement income per person is excluded; the rest is taxed. Exclusion: up to $31,110. |
| 401(k) and IRA withdrawals | Partly taxedIRA and 401(k) income counts toward the same $31,110 retirement income exclusion. |
| Government pensions | Partly taxedGovernment pensions share the $31,110 exclusion. |
| Military retirement pay | Partly taxedMilitary pensions share the $31,110 retirement income exclusion. |
| Estate tax | No |
| Inheritance tax | YesKentucky has an inheritance tax paid by beneficiaries; spouses, children and grandchildren are exempt. |
| Property tax help for seniors | Homeowners 65+ or disabled get a homestead exemption of $49,100 of assessed value for 2025-2026. |
| Sales tax | Kentucky has a 6% statewide sales tax and no local sales taxes. |
Recent changes and good to know
- The flat rate fell from 4% (2025) to 3.5% on January 1, 2026, under revenue triggers adopted in 2022.
- The $31,110 pension exclusion has not changed since 2018.
How to lower your retirement taxes in Kentucky
- Mix your income sources. Roth IRA withdrawals are tax-free at the federal level and generally in Kentucky too, so a Roth conversion before retirement can cut state tax later. Try the Roth conversion calculator.
- Watch federal Medicare costs. Large IRA withdrawals can raise your Medicare premiums. Check the 2026 IRMAA brackets.
- Think about your heirs. See what your IRA will really cost your family with the Family Tax Rate calculator.
- Comparing states? These have no state income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, Wyoming.
Frequently asked questions
Does Kentucky tax retirement income?
Partly: Kentucky exempts Social Security and the first $31,110 of retirement income per person, then taxes the rest at 3.5%.
Does Kentucky tax Social Security?
Social Security benefits are fully exempt.
Does Kentucky tax pensions?
Up to $31,110 of pension and retirement income per person is excluded; the rest is taxed.
Does Kentucky tax 401(k) and IRA withdrawals?
IRA and 401(k) income counts toward the same $31,110 retirement income exclusion.
Does Kentucky tax military retirement pay?
Military pensions share the $31,110 retirement income exclusion.
Does Kentucky have an estate or inheritance tax?
Kentucky has an inheritance tax paid by beneficiaries; spouses, children and grandchildren are exempt.
Sources (last verified 2026)
- Kentucky State Tax Guide — AARP (2026-04-10)
- State Individual Income Tax Rates and Brackets, 2026 — Tax Foundation (2026-02-17)
- Retirement Taxes: How All 50 States Tax Retirees — Kiplinger (2026)
Educational content only, not tax, legal or investment advice. Plans and tax laws change; confirm details with your employer's plan documents or your state revenue department. Smart Financial Lifestyle is not affiliated with any employer named on this site.