Kentucky Takes Another Step Toward Phasing Out Income Tax

Kentucky’s personal income tax rate will drop to 3.5% next year under legislation approved by Democratic Gov. Andy Beshear Thursday.

Beshear signed HB 1, which authorizes the reduction from the current 4% flat rate as of Jan. 1, 2026. The rate cut represents the continuation of a process launched by the Republican-controlled General Assembly in 2022 to shave the rate over time if certain revenue targets are achieved. In theory, the process is intended to eventually zero out the income tax.

• HB 1 is expected to reduce annual tax collections by $718 million, according to an analysis by ...