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Kentucky Wage and Payroll Tax Facts

February 02, 2024

Having to comply with unique state taxes and wage laws can make processing payroll doubly daunting. Here’s everything you need to know about these rates and laws for the state of Kentucky.

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Kentucky uses the same minimum wage rates as those required by the federal government in the Fair Labor Standards Act (FLSA). These rates are state-wide, as none of Kentucky's cities or counties have any unique minimum wage rates. 
 
When it comes to processing payroll, Kentucky-based organizations must handle the following taxes in addition to those required by the federal government:

The below information was last updated January 30, 2024. It is not intended as legal or tax advice.

Kentucky Minimum Wage Rates

Wage Type

Kentucky Rates

Federal Rates

Minimum Wage

 $7.25

$7.25

Tipped Minimum Wage

 $2.13

$2.13

Actual Tip Credit

 $5.12

$5.12

Kentucky State Income Tax (SIT) Rates

Kentucky has a flat income tax rate of 4.00%, meaning all residents pay the same amount regardless of their income levels.

Additional Kentucky SIT Details

Supplemental Withholding Computation

 Combine with regular wages and apply the same 4.00% tax rate. 

Exemptions
  • Any services or individuals not subject to withholding under the Internal Revenue Code (IRC)
  • Election campaign workers
  • Interstate commerce employees
  • Military pay
  • Those with no Kentucky tax liability
  • Nonresidents who live in reciprocating states (see below)
  • Nonresident military spouses

Form W-4

 Form K-4

Reconciliation Frequency

Annual

Kentucky State Unemployment Insurance (SUI) Rates

SUI provides unemployment benefits to eligible workers who are unemployed through no fault of their own (as determined by state law) and meet the state’s eligibility requirements.

Kentucky SUI Tax Details

Taxable Wage Base

$11,400

Employee Subject to Tax

No

Rates for Experienced Employers

0.30% - 0.90%

Rates for New Employers

2.70%

Effective Period

Calendar Year

Voluntary Contributions Allowed

Yes; due within 20 days of rate notice being mailed, and no later than 120 days after January 1

Kentucky State Disability Insurance (SDI) Rates

SDI benefits are funded by employees through mandatory payroll deductions from each paycheck. Kentucky, however, doesn't require employers to collect an SDI tax.

Miscellaneous Kentucky Tax Information

Reciprocal Agreement(s)

Reciprocal agreements are when workers who live and work in different states are only required to pay taxes to the state where they live. Kentucky currently has reciprocal agreements with the following states:

  • Illinois
  • Indiana
  • Michigan
  • Ohio
  • Virginia
  • West Virginia
  • Wisconsin

Residents of these states must complete Form 42A809 to certify non-residency.

Paid Sick Leave (PSL) Taxes

The state of Kentucky doesn’t require employers to collect PSL taxes, nor does the state have a program providing such leave to employees.

Paid Family and Medical Leave (PFML) Taxes

The state of Kentucky doesn’t require employers to collect PFML taxes, nor does the state have a program providing such leave to employees.

Local Taxes

In addition to the state-wide taxes mentioned above, some cities have occupational taxes as well.

Kentucky Employer Registration

The agencies below can help with your state-based employer registration, including best practices, account numbers, and unemployment information. Contact the Department of Revenue for withholding tax topics and the Division of Unemployment Insurance for unemployment tax topics.

Registration Details

Department of Revenue

Division of Unemployment Insurance

Phone

 (502) 564-7287 (502) 564-2168

Online Registration

 Kentucky Online Gateway Login Unemployment Tax Registration Process

Registration Instructions

 Online registration is required. Account numbers will be issued during the online process.

Online registration is required. Account numbers will be issued in 5-7 days via online process or in 2-3 weeks via mail.

Employer Self-Service Login

 Kentucky Online Gateway Login Kentucky's Unemployment Insurance Self-Service Web

Additional Kansas Payroll Tax Resources

 

This information is provided as a courtesy and may be updated at any time. It is not intended as legal or tax guidance. If you have questions or concerns, we encourage you to seek the advice of a qualified CPA, tax attorney, or advisor.

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