Kentucky law lowers personal income tax rates for 2023 and 2024 and removes triggers for future rate cuts (2024)

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Kentucky law lowers personal income tax rates for 2023 and 2024 and removes triggers for future rate cuts? ›

Kentucky law lowers personal income tax rates for 2023 and 2024 and removes triggers for future rate cuts. On February 17, 2023, Kentucky Governor Andy Beshear signed into law H.B.1, which lowers the state personal income tax rate to 4.5% retroactive to January 1, 2023, and to 4.0% effective January 1, 2024.

This amount will be incorporated into 2024 tax forms and should be used for tax planning in the new year. The individual income tax rate for 2024 has also been established to be 4.0%, a reduction by .

In 2023, they doubled down on the plan, passing a second bill that put into law the goal of eventually eliminating the tax. With the rate having now fallen to 4 percent, the tax cuts are already costing the state $1.3 billion annually — more than it spends on its entire system of public colleges and universities.

For single taxpayers, the standard deduction rose to $14,600, a $750 increase from the previous year. Heads of households, or unmarried taxpayers who have dependents and pay for more the half of the expenses of a household, can take a standard deduction of $21,900 in 2024, an increase of $1,100 from 2023.

As the IRS continues to work to implement the new law, the agency will treat 2023 as an additional transition year. As a result, reporting will not be required unless the taxpayer receives over $20,000 and has more than 200 transactions in 2023.

Kentucky is tax-friendly toward retirees. Social Security income is not taxed. Withdrawals from retirement accounts are partially taxed. Wages are taxed at normal rates, and your marginal state tax rate is 0.0%.

Kentucky imposes a flat income tax of 4.5%. The tax rate is the same no matter what filing status you use. Aside from state and federal taxes, many Kentucky residents are subject to local taxes, which are called occupational taxes.

“It's a conservative approach to a conservative goal to get [the income tax rate] to zero.” Because of House Bill 8, the state income tax went down from 5% to 4.5% this year. It will go down to 4% next year, but remain at 4% in 2025.

Overall, Kentucky's tax system ranks 18th on our 2024 State Business Tax Climate Index. Each state's tax code is a multifaceted system with many moving parts, and Kentucky is no exception. The first step towards understanding Kentucky's tax code is knowing the basics.

Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming are the only states that do not levy a state income tax. Note that Washington does levy a state capital gains tax on certain high earners.

What is the new relief bill for 2024? ›

Key provisions in the Tax Relief for American Families and Workers Act of 2024. The bill provides for increases in the child tax credit, delays the requirement to deduct research and experimentation expenditures over a five-year period, extends 100% bonus depreciation through 2025, and increases the Code Sec.

Key Takeaways. Social Security benefits may or may not be taxed after 62, depending on your other income earned. If you only receive Social Security benefits and no other income, then you likely won't pay federal income taxes. In 2024, ten states tax Social Security benefits in some manner.

Bottom line. So far, the average tax refund in 2024 is outpacing 2023. If you're among the millions of Americans getting something back from the IRS, make the most of it — either by paying down debt, depositing it in an interest-earning account or financing a major purchase. Subscribe to the CNBC Select Newsletter!

For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.

The new ”$600 rule”

Under the new rules set forth by the IRS, if you got paid more than $600 for the transaction of goods and services through third-party payment platforms, you will receive a 1099-K for reporting the income.

If you claimed 0 and still owe taxes, chances are you added “married” to your W4 form. When you claim 0 in allowances, it seems as if you are the only one who earns and that your spouse does not. Then, when both of you earn, and the amount reaches the 25% tax bracket, the amount of tax sent is not enough.

2024 Taxable Wage Base will increase to $11,400 per worker.

Kentucky has a flat income tax rate of 4.5%, a statewide sales tax of 6% and median property taxes of $1,320 annually. Both the sales and property taxes are below the national averages, while the state income tax is right around the U.S. mark.

The federal withholding tax rates from the IRS for 2024 are 10%, 12%, 22%, 24%, 32%, 35%, and 37%. This is unchanged from 2023. Do employers have to withhold taxes? Yes, employers do have to withhold taxes.