Kentucky has made the following changes to the tax laws for the 2020 tax year:
Which deductions changed?
- The Standard Deduction for 2020 is $2,650.
- Charitable contributions - Kentucky does not conform to the $300 "above the line" charitable contribution adjustment. This adjustment is allowed on the Federal tax return as a result of the CARES Act. If you claim this adjustment on your Federal tax return, it must be added back to your Kentucky State return.
- Excess Business Loss Limitation - Kentucky did not adopt the CARES Act amendment for the suspension of the excess business loss limitation. If you are an individual taxpayer and your net losses from your trades or businesses are more than $255,000 ($510,000 for married taxpayers filing jointly or married filing separately on a combined return) you will need to complete Kentucky Form 461-K. For resident filers you will enter the amount calculated from Form 461-K, line 16 on Form Schedule M, line 5. Nonresident Filers will enter the calculated amount from Form 461-K, line 16 on From 740-NP, page 4, line 16, Column B. The Kentucky excess business loss will be added to your net operating loss (NOL) carryforward.
What changes were made to state tax credits?
- Family Size Tax Credit - the 2020 threshold amount is $12,760 for a family of one, $17,240 for a size of two, $21,720 for a size of three, and $26,200 for a family size of four or more people.
- Income Gap Tax Credit - You can claim this new credit if you are eligible for the Family Size Tax Credit and have a family size of three people or less. This credit is designed to assist taxpayers whose rates increased due to the new flat 5% tax rate. This credit will be available in tax years 2019 and 2020.
- Kentucky Selling Farmers Tax Credit - A nonrefundable credit is allowed beginning with tax year 2020 for qualified selling farmers. This credit must be approved by the Kentucky Economic Development Finance Authority, and must be claimed on the tax return in the first year that the credit was approved. The maximum credit amount cannot exceed $25,000 in any taxable year, and the credit cannot exceed $100,000 over the lifetime of the selling farmers credit. Any unused credit in a taxable year may be carried forward up to five (5) years. If the credit is not used within the five (5) year period, the credit is lost.
Schedule KNOL Information:
- Starting on January 1, 2018, any net operating losses generated are limited to 80% of the taxable income. However, any unused amount may be carried forward indefinitely. You must complete Schedule KNOL if you are claiming a Kentucky NOL deduction on Schedule M.
- Kentucky did NOT adopt the CARES Act amendment for the suspension of the 80% net operating loss limitation.