Standard Deduction
The Kentucky standard deduction increased to $3,360 for tax year 2026.
Individual Income Tax Rate
The Kentucky individual income tax rate is 3.5% for tax year 2026.
Family Size Tax Credit Thresholds
The 2026 Family Size Tax Credit income thresholds are:
- Family Size 1: $15,960
- Family Size 2: $21,640
- Family Size 3: $27,320
- Family Size 4 or More: $33,000
Internal Revenue Code (IRC) Conformity
Kentucky updated its IRC reference date from December 31, 2024, to December 31, 2025. However, Kentucky continues to decouple from federal provisions allowing deductions for:
- Qualified tips
- Qualified overtime pay
- Qualified vehicle loan interest
In addition, Kentucky limits the mortgage interest deduction to interest paid on the taxpayer’s principal residence.
Angel Investor Tax Credit Expansion
The Angel Investor Tax Credit was expanded to include certain pass-through entities formed solely to make investments in a qualified small business.
New Refundable Economic Development Tax Credit
For tax years beginning on or after January 1, 2026, Kentucky allows a refundable and nontransferable Economic Development Tax Credit, with annual credits capped at $4 million.
Pension Income Exclusion
The 2026 pension income exclusion is 100% of taxable retirement benefits or $31,110, whichever is less, per taxpayer.
Filing Deadline
2026 Kentucky individual income tax returns must be filed by April 15, 2027.
Refundable Pass-Through Entity Tax Credit
Eligible taxpayers may claim the refundable Pass-Through Entity Tax Credit on Form 740 or Form 740-NP using information reported on Form PTET-CR.
If you provide the specific article you'd like updated, I can revise the entire article and incorporate all 2026 changes directly into the content.
For more information, please see Kentucky's instructions.