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STATE TAXES

KENTUCKY STATE CORPORATE INCOME TAX
Maximum Rate:  6.0%
Taxable Base: Gross
SOURCE: State of Kentucky
KENTUCKY SALES AND USE TAX
State Rate: 6.0%
Local Add-On: None
SOURCE: State of Kentucky
KENTUCKY INDIVIDUAL PERSONAL STATE INCOME TAX
Maximum State Tax Rate: 6.0%
Taxable Base: Net
SOURCE: State of Kentucky
KENTUCKY PROPERTY TAX [County Average]
Effective Property Tax Rate per $1,000 of home value
Graves County, KY: $5.47
SOURCE: BestPlaces.net
Income Tax Corporations
Kentucky corporations and foreign corporations owning or leasing property or having one or more paid employee(s) in Kentucky pay an income tax annually on taxable net income. Limited liability companies that are treated as corporations for federal income tax purposes also are treated as corporations for Kentucky income tax purposes.

Tax Rate Schedule for Corporations

Taxable Net Income Tax Rate (Per Taxable Income Level)
$0 - $50,000 4.0%
$50,001 - $100,000 5.0%
$100,001 (Plus) 6.0%
  Corporations having business income taxable both in Kentucky and elsewhere pay Kentucky income tax on that portion of business income earned in Kentucky. Gross income of corporations subject to Kentucky income tax is similar to income reported for federal income tax purposes. Included in Kentucky gross income is interest income from obligations of other states and their political subdivisions (bonds, notes, mortgages, etc.,) and income from intercorporate transactions adjusted to an arm's length basis, when required by the Kentucky Revenue Cabinet to prevent the avoidance of taxes. Net income for corporations subject to Kentucky income taxes is gross income minus the same deductions allowed for federal income taxes, except for the following which are not deductible when computing Kentucky net income:
  • Income taxes paid to other states, U.S. territories or possessions, or any foreign country or its political subdivisions
  • any deduction allocated to income which is exempt from taxation
  • certain dividends received by the corporation
  • amounts paid to any club, organization, or establishment that has been found by the courts or a government body to discriminate in its membership, privileges, or services on the basis of race, color, religion, national origin, or sex
Beginning January 1, 2005, a corporation in Kentucky shall not be allowed to carry its Kentucky net operating losses back. The carry forward of net operating losses (NOL) shall be reduced by the amount of distributive share, income, loss and deduction distributed to an individual or general partner. The NOL can be carried forward for up to twenty (20) years for tax years beginning after August 6, 1997. A multi-state corporation sustaining a tax loss only at its Kentucky facility during its first year of operation can carry the loss forward as a deduction from second year Kentucky taxable income, provided separate accounting can be used for the Kentucky activity. Kentucky has not adopted the federal five-year net operating loss carryback rule enacted by the Job Creation and Worker Assistance Act of 2002.
S Corporations
Kentucky income tax laws recognize small business "S Corporations" for special income tax treatment. Qualifying S Corporations can have up to seventy-five (75) shareholders (individuals, estates, or trusts) and must have a single class of stock. The income of S Corporations is exempt from state income taxes, except when the S Corporation realizes certain levels of capital gains. S Corporations must pay Kentucky income taxes whenever their net capital gains exceed $25,000, and exceed fifty percent (50%) of its taxable income for the taxable year and its taxable income for such year exceeds $25,000. The tax is the lesser of (a) the tax determined by applying the corporation income tax rates to the capital gains in excess of $25,000; or (b) the tax determined by applying the corporation income tax rates to the taxable income in excess of $25,000. In no case shall the S Corporation pay corporation income tax if Section 1374 of the Internal Revenue Code would exempt such capital gains from federal income tax. Stockholders of an S Corporation in Kentucky pay state individual income taxes on their pro rata shares of the corporation's net income accruing to them individually, whether or not the income is withdrawn from the corporation.

Tax Rate Schedule for Individuals

Taxable Income Tax Rate (Per Taxable Income Level)
$0 – $3,000 2.0%
$3,001 – $4,000 3.0%
$4,001 – $5,000 4.0%
$5,001 – $8,000 5.0%
$8,000 (Plus) 6.0%
Nonresident individuals that are shareholders of an S Corporation, which does business both in Kentucky and outside of the state, are taxed in Kentucky on the income of the corporation attributable to business conducted in the state. This is determined on the basis of the proportion of gross receipts from sales or services provided in Kentucky to sales or services provided everywhere.
Proprietorships & Partnerships
Sole proprietorships and partnerships are exempt from state corporate income taxes. Instead, the owners pay state individual income taxes on their shares of the earnings of the businesses, regardless of whether they take the income for their personal use or leave it in the business. Corporate partners who are partners in a partnership doing business in Kentucky are taxable on their distributive share of the partnership's income. If the corporate partner's only business activity in Kentucky is the partnership interest, then the corporate partner is subject to Kentucky's corporation income tax on its distributive share income multiplied by the ratio of the partnership's Kentucky gross receipts divided by the partnership's total gross receipts. Limited liability companies that are treated as partnerships for federal income tax purposes also are treated as partnerships for Kentucky income tax purposes. Although partnerships have no state income tax liability, they must file an information return annually. Income distributed from a qualified investment partnership to a nonresident partner is not subject to Kentucky tax. "Qualified investment partnership" is defined to mean a partnership formed to hold only investments that produce income that would not be taxable to the nonresident individual if held or owned individually.

Tax Rate Schedule for Individuals

Taxable Income Tax Rate (Per Taxable Income Level)
$0 – $3,000 2.0%
$3,001 – $4,000 3.0%
$4,001 – $5,000 4.0%
$5,001 – $8,000 5.0%
$8,000 (Plus) 6.0%
Owners of unincorporated businesses who earn over $5,000 each year without withholding for state income taxes and who have a state tax liability of more than $500 must file estimates of income and make payments quarterly. Nonresident individuals that are partners of a partnership, which does business both in Kentucky and outside of the state, are taxed in Kentucky on the income of the partnership attributable to business conducted in the state. This is determined on the basis of the proportion of gross receipts from sales or services provided in Kentucky to sales or services provided everywhere.