Kentucky offers several business incentive tax credits that may reduce your Kentucky income tax liability. Most of these credits require approval, certification, or documentation from a Kentucky agency before they can be claimed.
In many cases, you'll receive the credit amount on:
- A Kentucky tax credit certificate
- A Schedule K-1 from a partnership, LLC, estate, trust, or S corporation
- An approval letter from a Kentucky agency
If you received one of these documents, enter the credit in the corresponding field. Most Kentucky business incentive credits are nonrefundable, which means they can reduce your Kentucky tax liability but generally cannot increase your refund.
Where Do I Enter These Credits?
Kentucky Return > Credits > Business Incentive and Other Tax Credits
Available Credits
Nonrefundable Limited Liability Entity Credit
A credit passed through from a partnership, LLC, S corporation, or other qualifying entity. Enter the amount shown on your Schedule K-1 or supporting documentation.
Kentucky Small Business Tax Credit
A credit for approved small businesses that create and maintain eligible jobs in Kentucky.
Skills Training Investment Credit
A credit for approved businesses that invest in employee skills training programs.
Certified Rehabilitation Credit
A credit for approved rehabilitation expenses related to historic buildings and preservation projects.
Unemployment Credit
A credit related to approved Kentucky unemployment tax incentive programs.
Recycling/Composting Equipment Credit
A credit for the purchase of qualifying recycling or composting equipment used in business operations.
Kentucky Investment Fund Credit
A credit for investments made in approved Kentucky investment funds.
Qualified Research Facility Credit
A credit for constructing, expanding, or improving qualified research facilities in Kentucky.
GED Incentive Credit
A credit available to employers who help employees earn a GED credential.
Environmental Remediation Credit
A credit for approved environmental cleanup and remediation projects.
Biodiesel Credit
A credit for approved biodiesel production, blending, or distribution activities.
Clean Coal Incentive Credit
A credit for approved clean coal projects and related investments.
Ethanol Credit
A credit for qualifying ethanol production activities.
Cellulosic Ethanol Credit
A credit for producing ethanol from qualifying cellulosic biomass materials.
Railroad Maintenance and Improvement Credit
A credit for qualifying railroad track maintenance and improvement expenses.
Endow Kentucky Credit
A credit for approved charitable contributions made through qualified Kentucky community foundation endowments.
New Markets Development Program Credit
A credit intended to encourage investment in low-income and underserved communities.
Distilled Spirits Credit
A credit available to qualifying distilled spirits producers based on certain taxes paid on aging distilled spirits inventories.
Angel Investor Credit
A credit for approved investments in qualifying Kentucky startup and early-stage businesses.
Renewable Chemical Production Credit
This credit has expired. Enter an amount only if you received documentation showing that a carryforward credit is still available.
Qualified Broadband Investment Credit
A credit for approved investments that expand broadband access in Kentucky.
Inventory Credit
The Kentucky Inventory Credit is claimed separately.
For more information, see: What Is the Kentucky Inventory Credit (Schedule INV)?
What Information Will I Need?
Depending on the credit you're claiming, you may need:
- A Schedule K-1
- A Kentucky credit certificate
- An approval letter
- Supporting schedules or worksheets
- Carryforward information from a prior year
Enter the credit amount exactly as shown on your documentation.
Important
- Most Kentucky business incentive credits require approval or certification before they can be claimed.
- Returns claiming these credits may need to be printed and mailed to the Kentucky Department of Revenue.
- Include all required schedules, certificates, approval letters, and supporting documentation with your return.
- Nonrefundable credits can reduce your Kentucky tax liability but generally cannot increase your refund.
- Keep copies of all supporting documents with your tax records.