Is My Retirement Income Taxable to Kentucky? (Schedule P)
Maybe. Kentucky allows many taxpayers to exclude some or all of their qualifying retirement income from Kentucky income tax. The amount you can exclude depends on the type of retirement income you received and, in some cases, when you retired. For tax year 2026, the maximum exclusion is generally the lesser of 100% of qualifying retirement income or $31,110 per taxpayer.
If you're married filing jointly, each spouse may qualify for a separate retirement income exclusion. Only retirement income received while you were a Kentucky resident can be included in the calculation.
What Retirement Income Qualifies for the Kentucky Exclusion?
Kentucky may allow all or part of the following types of 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 you can exclude depends on when the retirement benefits were earned and your retirement date. Kentucky's pension income exclusion rules continue to allow up to $31,110 of qualifying retirement income per taxpayer in 2026.
Kentucky's retirement income rules are summarized in the Kentucky Department of Revenue's federal and state tax differences chart.
Where Do I Enter Schedule P Information?
Go to:
State > Select the 3 dots to Edit Kentucky Return > Retirement Income (Schedule P Part I Only)
The information you enter will be used to calculate your Kentucky retirement income exclusion.
Retirement Before January 1, 1998
Use this section if your retirement benefits are attributable to service credit earned before January 1, 1998.
For each retirement income source, enter:
- Name of payer
- Date of retirement
- Retirement income amount
- Whether the income belongs to the taxpayer or spouse
Examples of payers include:
- Federal retirement systems
- Kentucky state retirement systems
- Kentucky local government retirement systems
If you receive retirement income from more than one payer, enter each source separately.
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 - The retirement plan administrator, pension system, employer, or other organization that paid the benefit. This is typically shown on Form 1099-R.
- Date of retirement - The date you officially retired from the employer or retirement system.
- Taxable Pension Amount - The taxable pension amount reported for federal income tax purposes.
- Exempt Percentage - The percentage of retirement income that qualifies for Kentucky's exclusion.
- Taxpayer or Spouse designation
What Is the Exempt Percentage?
The exempt percentage determines how much of the retirement income qualifies for Kentucky's exclusion.
Enter the percentage as a whole number or decimal percentage with up to two decimal places.
Examples:
- 100% = Enter 100
- 75.50% = Enter 75.50
- 50% = Enter 50
Other Retirement Income
Use this section for qualifying retirement income that isn't entered elsewhere on Schedule P, including:
- IRA distributions
- 401(k) distributions
- Annuities
- Other qualifying retirement benefits received while a Kentucky resident
Enter amounts separately for:
- Taxpayer
- Spouse
What Happens Next?
After you enter your Schedule P information, the program calculates your Kentucky retirement income exclusion automatically.
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, reducing the amount of retirement income subject to Kentucky income tax. Kentucky's 2026 pension exclusion remains limited to the lesser of qualifying retirement income or $31,110 per taxpayer.
Important Reminders
- Only enter retirement income received while you were a Kentucky resident.
- Enter retirement income in the section that matches your retirement date.
- If you receive income from multiple retirement plans or pensions, enter each payer separately.
- Keep copies of Forms 1099-R and any retirement plan documentation with your tax records.
- If your retirement income includes benefits from a federal, Kentucky state, or Kentucky local government retirement system, or supplemental Railroad Retirement benefits and your retirement income exceeds the exclusion limit, Schedule P may be required to determine your allowable exclusion.
For taxpayers who need Schedule P, the Kentucky pension exclusion worksheet and Schedule P calculations help determine the correct exclusion amount.