Kentucky Schedule J Overview

Kentucky Schedule J is used by qualifying taxpayers to average all or a portion of their current-year farm income over the previous three tax years when calculating Kentucky income tax. This election may reduce the overall tax liability for taxpayers whose farm income varies significantly from year to year.

Program Entry

Kentucky > Tax > Schedule J

When Will This Section Appear?

A taxpayer may use Kentucky Schedule J if:

• The taxpayer has elected farm income.
• The taxpayer qualifies to use Federal Schedule J.
• Taxable income from the prior three tax years is available to complete the calculation.
• The taxpayer elects to use Schedule J by selecting Yes.
• The elected farm income does not exceed the amount reported on Federal Schedule J, Line 2(a).

What Information Is Required?

Schedule J Entry

Enter the following information:

• 2025 Elected Farm Income
• 2022 Taxable Income
• 2023 Taxable Income
• 2024 Taxable Income

Then select Yes for Use Schedule J to apply the farm income averaging election.

Prior-Year Taxable Income

Schedule J requires Kentucky taxable income from the three preceding tax years:

• 2022 Taxable Income
• 2023 Taxable Income
• 2024 Taxable Income

If Schedule J was used in one or more of those years, Kentucky Schedule J instructions provide specific rules for determining the taxable income amount used in the current-year calculation.

How Does Schedule J Work?

Schedule J calculates tax by:

1. Subtracting elected farm income from current-year taxable income.
2. Dividing the elected farm income equally among the three preceding tax years.
3. Adding one-third of the elected farm income to each prior year's taxable income.
4. Recalculating tax using the applicable Kentucky tax rates for each year.
5. Combining the results to determine the Kentucky income tax liability.

Important Notes

• Schedule J is an election and is not required.
• Kentucky Schedule J is based on the federal farm income averaging election and uses Kentucky taxable income amounts from prior years to calculate the tax.
• The elected farm income cannot exceed the amount reported on Federal Schedule J, Line 2(a).
• Taxpayers should retain records supporting the elected farm income and prior-year taxable income amounts.
• If elected farm income includes income earned in another state, additional calculations may be necessary when determining the Kentucky credit for taxes paid to another state.
• Schedule J must be attached to the Kentucky return when the election is made.