The Tax section of the Kentucky return allows you to review or enter additional tax-related amounts that may apply to your Kentucky individual income tax return. Kentucky individual income tax is generally calculated automatically based on the information entered in the program. For tax year 2025, Kentucky uses a 4% individual income tax rate. Taxpayers who qualify for Kentucky Farm Income Averaging may calculate tax using Schedule J instead of the standard tax computation.
Use Tax
What is Use Tax?
Kentucky use tax applies to taxable items purchased for use in Kentucky when Kentucky sales tax was not collected at the time of purchase. Common examples include:
- Online purchases
- Catalog orders
- Subscription purchases
- Furniture
- Carpet
- Boats
- Other taxable tangible personal property
The use tax rate is generally 6% of the purchase price of taxable items purchased outside Kentucky for use within the state when sales tax was not paid. Enter the amount of use tax due in this field. The software adds this amount to your Kentucky tax liability.
When to enter an amount:
- You made taxable out-of-state purchases.
- Kentucky sales tax was not charged or collected.
- You owe Kentucky use tax on those purchases.
Interest
Interest may apply when a tax balance is paid after the original due date of the return. If the Kentucky Department of Revenue has calculated interest due on a balance, or if you know the amount that applies to your filing situation, enter it here.
When to enter an amount:
- You are filing or paying after the due date.
- Interest has been calculated on an unpaid tax balance.
Late Payment Penalty
Kentucky may assess a late payment penalty when taxes are not paid by the required due date. Kentucky's standard late payment penalty is generally 2% of the unpaid tax for each 30 days or fraction thereof, up to a maximum of 20%, with a minimum penalty of $10.
When to enter an amount:
- Your Kentucky tax was not paid by the due date.
- You have been notified of a penalty amount or have calculated the penalty separately.
Late Filing Penalty
A late filing penalty may apply when a Kentucky return is filed after the due date. Kentucky generally imposes a penalty of 2% of the tax due for each 30 days or fraction thereof, up to a maximum of 20%. The minimum penalty is typically $10, although different minimums may apply in specific circumstances.
When to enter an amount:
- The Kentucky return was filed after the filing deadline.
- A late filing penalty applies to your return.
Schedule J
Schedule J is used for Kentucky Farm Income Averaging. Eligible taxpayers may use this schedule to average farm income over prior years, potentially reducing their current-year tax liability. Kentucky Schedule J is based on the federal farm income averaging provisions and is used in lieu of the standard tax computation when applicable.
Use Schedule J if:
- You qualify for farm income averaging.
- You completed or need to complete Kentucky Schedule J calculations.
Click here to view our article regarding the Kentucky Schedule J.
Notes
- Most taxpayers will not need to enter anything in this section unless use tax, interest, penalties, or farm income averaging applies to their return.
- Kentucky income tax is otherwise calculated automatically from the income, deductions, credits, and other information entered throughout the return.