Income tax withholding
| Imposes wage income tax | Yes |
|---|---|
| Rate structure | Flat 3.5% |
| Withholding certificate | K-4 Kentucky's Withholding Certificate |
| Accepts federal Form W-4 | No |
| Convenience-of-the-employer rule | No |
| Nonresident withholding threshold | From the first dollar Withholding required from the first dollar of Kentucky-source wages for nonresidents who are not covered by a reciprocity agreement. |
| Local income taxes | Yes Kentucky cities, counties and school districts levy occupational license (payroll) taxes ranging roughly 0.008%-2.5% (e.g., Louisville Metro, Lexington-Fayette). These are administered locally and are NOT covered by Kentucky's state reciprocity agreements -- reciprocal-state residents still owe local occupational tax on Kentucky work. |
Reciprocity
Kentucky exempts residents of 7 states from Kentucky withholding, provided the employee files 42A809 with the employer.
Confirmed in 103 KAR 17:140. Important per-state limits: OHIO -- exemption does NOT apply to an S corporation shareholder-employee owning 20% or more of the S corporation (effective 1/1/2007). VIRGINIA -- limited to Virginia residents who COMMUTE DAILY to work in Kentucky. Also: a resident of any reciprocal state who spends more than 183 days in Kentucky is treated as a Kentucky resident and loses reciprocity.
States that exempt Kentucky residents
A Kentucky resident working in these states files that state's certificate and is taxed only by Kentucky.
Unemployment insurance and paid leave
| Taxable wage base 2026 | $12,000 2025 base was $11,700. |
|---|---|
| New employer rate | 2.7% |
| Experience rate range | 0.3% – 9% |
| Experience-rating method | reserve ratio |
| Employee UI contribution | No |
| Paid family / medical leave | No |
Employer registration
- Tax agency
- Kentucky Department of Revenue
- UI agency
- Kentucky Office of Unemployment Insurance (Education and Labor Cabinet)
Sources
revenue.ky.gov · revenue.ky.gov · revenue.ky.gov · oui.doleta.gov · oui.doleta.gov · oui.doleta.gov