KY
Kentucky Small Business Tax Guide
Kentucky income and sales tax as the Department of Revenue states it, plus LLC fees from the Secretary of State. Educational overview, not tax advice.
Disclaimer: This page is educational content only. Tax laws change, and your situation may differ. It is not legal, tax, or financial advice. Consult a qualified professional licensed in Kentucky before making filing or planning decisions.
Tax landscape for small businesses
Two Kentucky agencies supply the state figures below, the Department of Revenue (DOR) and the Secretary of State, and IRS pages supply the federal ones. Next to every number is where it came from and when it was checked.
DOR's individual income tax page (Kentucky, checked October 31, 2026) says "The tax rate is four (4) percent and allows itemized deductions and certain income reducing deductions as defined in KRS 141.019." It also says "Kentucky's individual income tax law is based on the Internal Revenue Code in effect as of December 31, 2024." DOR's instructions for the 2025 Form 740 (Kentucky, as retrieved on November 1, 2026) place that rate in one year: "For 2025, the tax rate for individual income tax is 4%." Neither DOR page quoted here gives a 2026 figure; DOR can confirm which rate fits the year you're filing for.
DOR's sales and use tax page (Kentucky, checked October 31, 2026) says "Kentucky Sales and Use Tax is imposed at the rate of 6 percent of gross receipts or purchase price. There are no local sales and use taxes in Kentucky."
Worked example, with sample figures: a Kentucky invoice for $1,800.00 of taxable goods at the "6 percent" rate DOR quotes (Kentucky, checked October 31, 2026) carries a sales tax line of $108.00 (1,800.00 × 0.06) and comes to $1,908.00. Because DOR says "There are no local sales and use taxes in Kentucky.", no local line is added.
Tax overview
Each row lists a tax area and its notes. Confirm current figures with your state's tax agency or the IRS.
| Tax type | Rate or basis | Notes |
|---|---|---|
| Individual income tax | "four (4) percent"; "For 2025" | DOR's individual income tax page (Kentucky, checked October 31, 2026): "The tax rate is four (4) percent and allows itemized deductions and certain income reducing deductions as defined in KRS 141.019." "Kentucky's individual income tax law is based on the Internal Revenue Code in effect as of December 31, 2024." DOR's 2025 Form 740 instructions (Kentucky, as retrieved on November 1, 2026): "For 2025, the tax rate for individual income tax is 4%." No 2026 rate is quoted here. |
| Sales and use tax | "6 percent" | DOR's sales and use tax page (Kentucky, checked October 31, 2026): "Kentucky Sales and Use Tax is imposed at the rate of 6 percent of gross receipts or purchase price. There are no local sales and use taxes in Kentucky." |
| LLC filing fees (Secretary of State) | "Articles of Organization: $40.00" | The Secretary of State's fee page (Kentucky, checked October 31, 2026), under "Domestic Limited Liability Company (Profit, Non-Profit or Professional Service)", also lists "Annual Report: $15.00". |
| Federal self-employment tax | "15.3%" | The IRS self-employment tax page (In the US (federal), last reviewed or updated October 30, 2026): "The self-employment tax rate is 15.3%. The rate consists of two parts: 12.4% for social security (old-age, survivors, and disability insurance) and 2.9% for Medicare (hospital insurance)." |
Filing requirements
This list isn't a complete checklist for your business.
Kentucky individual return
DOR's individual income tax page (Kentucky, checked October 31, 2026) says "A full-year resident of Kentucky files Form 740 and a person who moves into or out of Kentucky during the year or is a full-year nonresident files Form 740-NP." Ask DOR for the due date for your year.
Sales tax for sellers outside Kentucky
DOR's sales and use tax page (Kentucky, checked October 31, 2026) says "HB 487, effective July 1, 2018, requires remote retailers with 200 or more sales into the state or $100,000 or more in gross receipts from sales into the state to register and collect Kentucky sales and use tax."
Federal estimated tax
The IRS estimated taxes page (In the US (federal), last reviewed or updated September 25, 2026) says "Individuals, including sole proprietors, partners, and S corporation shareholders, generally have to make estimated tax payments if they expect to owe tax of $1,000 or more when their return is filed." It adds: "For estimated tax purposes, the year is divided into four payment periods."
Deductions and write-offs
Confirm with your state how it treats each item.
- Kentucky deductions: DOR's individual income tax page (Kentucky, checked October 31, 2026) says the income tax "allows itemized deductions and certain income reducing deductions as defined in KRS 141.019." Ask DOR or a tax professional which apply to you.
- Federal SE tax deduction: the IRS (In the US (federal), last reviewed or updated October 30, 2026) says "You can deduct the employer-equivalent portion of your self-employment tax in figuring your adjusted gross income."
- Keeping records: the IRS recordkeeping page (In the US (federal), last reviewed or updated May 1, 2026) says "You may choose any recordkeeping system suited to your business that clearly shows your income and expenses."
Practical tips
- Budget for the LLC annual report. The Secretary of State (Kentucky, checked October 31, 2026) lists "Annual Report: $15.00" for a domestic limited liability company.
- Enter Kentucky's rate in your invoicing setup. Billed's invoice software page says "Save your tax rates and settings once, and Billed calculates taxes automatically when you create invoices and estimates."
- Keep each receipt with its cost. Billed's expense tracking page says "Attach the receipt when you record the expense, and it stays with that entry in your Billed account instead of in a drawer or an inbox."
- Confirm the figures with DOR and the IRS before you file; rates and fees can change.
Frequently asked questions
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At a glance
| Topic | What DOR, the Secretary of State or the IRS says |
|---|---|
| Income tax, 2025 | "The tax rate is four (4) percent" (DOR, Kentucky, checked October 31, 2026); "For 2025, the tax rate for individual income tax is 4%." (DOR 2025 Form 740 instructions, as retrieved on November 1, 2026) |
| Sales and use tax | "Kentucky Sales and Use Tax is imposed at the rate of 6 percent of gross receipts or purchase price. There are no local sales and use taxes in Kentucky." (DOR, Kentucky, checked October 31, 2026) |
| LLC formation | "Articles of Organization: $40.00" (Secretary of State, Kentucky, checked October 31, 2026) |
| Self-employment tax | "The self-employment tax rate is 15.3%." (IRS, In the US (federal), last reviewed or updated October 30, 2026) |
When this isn't for you
For Kentucky sole proprietors and small LLCs who want state and federal points with their sources. Payroll withholding, local occupational license taxes and audits aren't covered; ask DOR, your city or a tax professional.