Maybe. Kentucky allows an exclusion for certain retirement income, which may reduce or eliminate the amount of retirement income taxable on your Kentucky return. The amount you can exclude depends on the type of retirement income you received and your retirement date.
Schedule P is used to calculate Kentucky's retirement income exclusion. To complete Schedule P, enter each source of qualifying retirement income, the retirement date, and the required information for you or your spouse. The program will use this information to calculate your allowable exclusion.
For tax year 2025, Kentucky generally allows an exclusion equal to the lesser of 100% of your qualifying retirement income or $31,110 per taxpayer. If you're filing a joint return, each spouse may qualify for a separate exclusion. Only include retirement income received while you were a Kentucky resident.
What Retirement Income Qualifies?
Kentucky may allow all or part of the following retirement income to be excluded:
- Pension income
- Annuities
- IRA distributions
- 401(k) distributions
- Deferred compensation plan distributions
- Death benefits paid under a retirement plan
- Certain disability retirement benefits
- Supplemental (Tier 2) Railroad Retirement benefits
The amount of the exclusion depends on when the retirement benefits were earned and the date of retirement.
Where Do I Enter This in the Program?
State > Edit Kentucky Return > Retirement Income (Schedule P Part I Only)
What Information Do I Need?
Schedule P is divided into sections based on your retirement date.
Retirement Before January 1, 1998
Use this section for retirement benefits attributable to service credit earned before January 1, 1998.
For each retirement income source, enter:
- Name of payer
- Date of retirement
- Amount of retirement income
- Whether the income belongs to the Taxpayer or Spouse
Examples of payers may include:
- Federal government retirement systems
- Kentucky state retirement systems
- Kentucky local government retirement systems
You may enter multiple retirement income sources if applicable.
Retirement After December 31, 1997
A partial exclusion may be available for retirement income received after December 31, 1997.
For each retirement income source, enter:
- Name of payer - Enter the name of the retirement plan administrator, employer, pension system, or other organization that paid the retirement benefit. You can usually find this information on Form 1099-R.
- Date of retirement - Enter the date you officially retired from the employer or retirement system paying the benefit. This date helps determine how much of the retirement income qualifies for Kentucky's exclusion.
- Taxable Pension Amount - Taxable amount of pension income reported for federal income tax purposes.
- Exempt percentage - Enter the percentage of the retirement income that qualifies for Kentucky's retirement exclusion.
- Whether the income belongs to the Taxpayer or Spouse
What Is the Exempt Percentage?
The exempt percentage determines how much of your retirement income qualifies for Kentucky's exclusion.
Enter the percentage as a whole number.
Examples:
- 100% = Enter 100
- 75.50% = Enter 75.50
- 50% = Enter 50
Only enter up to two decimal places.
Other Retirement Income
Use this section to enter qualifying retirement income received while you were a Kentucky resident that is not entered elsewhere on Schedule P.
Examples may include:
- IRA distributions
- 401(k) distributions
- Annuities
- Other qualifying retirement benefits received while a Kentucky resident
Enter the amount separately for:
- Taxpayer
- Spouse
What Happens Next?
The program uses the information entered on Schedule P to calculate your Kentucky retirement income exclusion.
If you're filing a joint return, the exclusion is calculated separately for each spouse. The allowable exclusion is then applied to your Kentucky return to reduce the amount of retirement income subject to Kentucky tax.
Important
- Only enter retirement income received while you were a Kentucky resident.
- Enter retirement income in the section that matches your retirement date.
- If you have more than one pension or retirement plan, enter each payer separately.
- Keep copies of Forms 1099-R and any retirement plan documentation with your tax records.