Overview
Kentucky uses a flat state income tax rate, making withholding calculations straightforward. The state has reciprocal tax agreements with several neighboring states, which can affect withholding for employees who live in one state and work in another.
State Income Tax (SIT)
Kentucky imposes a flat state income tax of 4.0% on all taxable wages. The calculation is simple—just apply the flat rate to taxable wages. Kentucky has reciprocal agreements with Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin, meaning employees from those states working in Kentucky may be exempt from Kentucky withholding.
| Tax Structure | Flat rate: 4.0% |
| State Withholding Form | Form K-4 |
| Supplemental Rate | 4.0% |
| Reciprocal States | IL, IN, MI, OH, VA, WV, WI |
| Special Note | Reciprocal state employees may claim exemption |
Supplemental Wages
Kentucky supports the following supplemental calculation methods. When using the flat method, the supplemental rate is 4.0%.
Employer State Unemployment Tax (SUTA)
Your assigned SUTA rate will be based on your company’s experience with unemployment claims. New employers typically start at the default rate of 2.7%.
| Tax Type | Employer-paid only |
| Default New Employer Rate | 2.7% |
| Rate Assignment | Experience-rated; assigned annually by the state |
Other Taxes & Obligations
Kentucky does not currently impose significant additional state-level payroll taxes beyond SIT and SUTA. This keeps payroll relatively streamlined compared to states with multiple layers of tax obligations.
Disclaimer: This content is provided for general informational purposes only and does not constitute legal, tax, or accounting advice. Netchex does not provide tax or legal guidance and makes no representations regarding the accuracy or applicability of this information. Laws and regulations may change. The information on this page reflects payroll tax guidelines as of March 2026. For the most current requirements, please refer to: Kentucky Department of Revenue
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