Kentucky Paycheck Calculator 2026
Kentucky has a flat 4.5% state income tax (reduced from 5% in recent years). Most Kentucky cities and counties levy an additional occupational license tax (OLT) on wages, ranging from 0.01% to 2.5%.
Kentucky tax breakdown — what you need to know
Key facts about Kentucky state, local, and federal taxes for 2026.
Kentucky state rate dropped to 4.5%
Kentucky has been systematically lowering its flat income tax rate. It dropped from 5% to 4.5% in 2023, and further reductions to 4% are planned if revenue triggers are met. This is one of the most significant tax cuts in the state's history.
Occupational License Tax (OLT)
Most Kentucky cities and counties charge an Occupational License Tax on wages and self-employment income. Unlike PA or OH, Kentucky OLT is often charged at BOTH the city and county level, so residents of Frankfort pay a combined city + county rate.
Where-you-work basis
Most Kentucky local taxes are based on where you WORK (not where you live), unlike Pennsylvania's EIT. If you work in Lexington but live in a rural county, you owe Lexington's 2.25% OLT.
Northern Kentucky cities
Cities in Northern Kentucky (Cincinnati metro area) such as Covington, Newport, Bellevue, and Southgate charge some of the highest local rates in the state — up to 2.5% — on top of Kentucky's 4.5% state tax.
Major Kentucky local occupational tax rates
Source: state revenue departments and municipal ordinances. Rates effective 2026.
| Jurisdiction | OLT rate | Notes |
|---|---|---|
| Newport | 2.50% | Highest rate |
| Covington | 2.45% | |
| Bellevue | 2.50% | |
| Southgate | 2.50% | |
| Lexington-Fayette | 2.25% | Urban county govt |
| Louisville/Jefferson Co. | 2.20% | Merged city/county |
| Bowling Green | 1.85% | |
| Florence | 2.00% | |
| Frankfort (city+county) | 2.75% | Combined rate |
| Most rural counties | 0.50%–1.00% |