Are you tired of constantly feeling like you’re being taxed for every little thing? Well, here’s a bit of good news for those of you living in Kentucky. There are certain things in this state that are not taxed. Yes, you heard that right! You can enjoy some products and services without worrying about the added tax burden.
What are these tax-free goodies you ask? Well, to start with, prescription medicine is not taxed in Kentucky. This may seem like a small thing, but it’s actually a big deal for those who rely on medication to manage their health. Tax-free medication means a lower cost of living for those who need it most. Additionally, if you’re looking to buy food, you’ll be pleased to know that groceries are also exempt from sales tax in Kentucky. So, next time you go grocery shopping, you can leave your worries about tax at the door.
But wait, there’s more! Kentucky offers more tax-free services such as healthcare, education, childcare, and legal services. For instance, if you need to take your kids to daycare, you won’t be charged any sales tax. And, if you’re pursuing further education, you won’t have to worry about paying any tax on your tuition fees. All in all, there are several areas where you can save some money by avoiding sales tax in Kentucky. So, if you’re wondering where to save a few bucks, start with these tax-free options!
Sales Tax Exemptions in Kentucky
Kentucky is known for its attractive tax climate and highly favorable sales tax exemptions. As a savvy resident, it’s essential to know the things that are not taxable in Kentucky. Here are some of the most common exemptions available:
- Food & beverages: Since July 01, 2018, Kentucky has exempted food and beverages sold for consumption from sales tax. This includes items such as milk, eggs, meat, and fruits, to name a few. The exemption, however, does not apply to prepared food, alcoholic beverages, or dietary supplements.
- Packaging materials & containers: Businesses can purchase packaging materials and containers without paying sales tax, provided they are used for the movement of goods and not for display purposes. Examples of such packaging materials include bags, boxes, tape, and wrapping paper.
- Medical equipment & supplies: Medical equipment and prescription drugs are exempt from sales tax in Kentucky. This includes items such as bandages, syringes, hearing aids, and wheelchairs. Over-the-counter medicines and non-prescription devices, however, are taxable.
Exemptions for Farmers
Kentucky has provided various tax incentives to farmers, thanks to the vital role they play in the state’s economy. Here are some exemptions specific to farmers:
- Agricultural productions: Sales tax does not apply to retail sales of seeds, plants, animal feed, and fertilizers used in agricultural production. Fuel used for agricultural purposes is also exempt from sales tax.
- Farm machinery & equipment: Purchases of machinery and equipment used in agricultural production are exempt from Kentucky’s sales and use tax. The exemption includes items such as tractors, combines, and plows. The equipment must be used by a qualified farmer and in the production of crops or livestock.
Sales tax holiday
Kentucky has a unique sales tax holiday that exempts specific items from sales tax. The holiday runs for three days in August and is a shopping opportunity for both residents and visitors. The exemption applies to clothing, footwear, and school supplies that are priced at $100 or less per item. Computers and computer equipment also qualify for the exemption but must be less than $1,000 per item.
| Item | Exemption Criteria |
|---|---|
| Clothing | Individual items less than $100 |
| School supplies | Individual items less than $100 |
| Computers & computer equipment | Individual items less than $1,000 |
Overall, understanding Kentucky’s sales tax exemptions is a valuable resource to keep more cash in your pocket. By staying up-to-date with the various tax incentives in the state, you can reduce your overall tax burden and increase your savings over time.
Property tax exemptions in Kentucky
Property owners in Kentucky may be eligible for various exemptions that can reduce or eliminate their property tax burden. These exemptions include:
- Homestead exemption: This exemption provides a $39,300 reduction in assessed property value for homeowners who are at least 65 years old, disabled, or blind. The property must also be the homeowner’s primary residence.
- Veterans’ exemption: This exemption is available to veterans who are permanently and totally disabled, or to the surviving spouse of a soldier who died in service. It provides a $37,600 reduction in assessed property value.
- Disabled person’s exemption: This exemption is available to property owners who are permanently and totally disabled. It provides a $37,600 reduction in assessed property value.
Property owners should apply for these exemptions through their county’s property valuation administrator (PVA).
Exempt properties in Kentucky
There are some types of properties in Kentucky that are exempt from property taxes altogether. These include:
- Religious properties: Properties used exclusively for religious worship are exempt from property taxes.
- Government properties: Government-owned buildings and land are exempt from property taxes.
- Charitable properties: Properties owned by charities and used exclusively for charitable purposes are exempt from property taxes.
Additional exemptions
There are additional exemptions available in Kentucky, such as the Clean Energy Property Tax Credit and the Agricultural Development Fund Property Tax Credit. These exemptions are designed to encourage investment in clean energy and agriculture in the state. Property owners interested in these exemptions should contact their PVA for more information.
| Exemption | Description |
|---|---|
| Clean Energy Property Tax Credit | Provides a credit against property taxes for property owners who install solar panels or other clean energy systems. |
| Agricultural Development Fund Property Tax Credit | Provides a credit against property taxes for property owners who participate in the Agricultural Development Fund’s programs. These programs are designed to support the development of agriculture in Kentucky. |
Property owners should consult their tax advisors to see if they qualify for any of these exemptions.
Types of Income not Taxed in Kentucky
When it comes to paying taxes, every penny counts. Luckily for the residents of Kentucky, the state has a long list of types of income that are not subject to taxation. Here, we will discuss the top three types of income that are not taxed in Kentucky:
Exclusions from Gross Income
- Gifts and Inheritances: The IRS defines gifts as any transfer of property where the donor does not receive something of equal value in return. Kentucky follows the same rules as the IRS, so gifts are not subject to state income tax. Inheritances are also not taxable in the state.
- Life Insurance Proceeds: If a Kentucky resident is the beneficiary of a life insurance policy, the proceeds of the policy are not taxable. However, if the policy is transferred for money or other valuable consideration, the tax exclusion does not apply.
- Workers’ Compensation Payments: If an individual receives workers’ compensation benefits due to a work-related injury or illness, those payments are not taxable under Kentucky law. This tax exclusion also applies to disability and medical payments received as part of a workers’ compensation claim.
Military Pay
Another major exemption from income tax in Kentucky is military pay. Active duty military pay is not taxable by the state, regardless of where the service member is stationed. National Guard and Reserve pay is also exempt from Kentucky state tax if the service member has been ordered to active duty for a period of more than 30 consecutive days.
Retired military pay is also non-taxable if the individual is under the age of 65 and meets certain requirements. However, retirement pay received due to a disability is exempt for all veterans, regardless of age.
Social Security and Railroad Retirement Benefits
Both Social Security and Railroad Retirement benefits are exempt from Kentucky state tax. However, these benefits may still be subject to federal taxation depending on the recipient’s total income and filing status. The following table outlines the federal taxation rules for Social Security and Railroad Retirement benefits:
| Filing Status | Combined Income | Taxable Amount of Benefits |
|---|---|---|
| Single, Head of Household, Qualifying Widow(er) | Less than $25,000 | 0% |
| Single, Head of Household, Qualifying Widow(er) | $25,000-$34,000 | Up to 50% |
| Single, Head of Household, Qualifying Widow(er) | More than $34,000 | Up to 85% |
| Married Filing Jointly | Less than $32,000 | 0% |
| Married Filing Jointly | $32,000-$44,000 | Up to 50% |
| Married Filing Jointly | More than $44,000 | Up to 85% |
It’s important to note that these rules only apply to the federal taxation of Social Security and Railroad Retirement benefits. Kentucky exempts these benefits from state tax entirely.
Healthcare Exemptions in Kentucky
When it comes to taxes, healthcare expenses can often be a major concern for individuals and families alike. Fortunately, Kentucky offers a number of exemptions that can help offset these costs, making it easier for residents to access the care they need without breaking the bank.
- Medicare Premiums: If you are over the age of 65 or have a qualifying disability, you may be exempt from state income tax on your Medicare premiums.
- Long-term Care Insurance: Premiums for long-term care insurance policies are also exempt from state income tax, making it easier for individuals to plan for their future healthcare needs.
- Medical and Dental Expenses: Expenses related to medical and dental care that exceed 7.5% of your adjusted gross income are deductible on your state income tax return.
Additionally, Kentucky offers a number of programs to assist with healthcare costs for low-income residents:
- Medicaid: Kentucky’s Medicaid program provides healthcare coverage to low-income individuals and families, including children, pregnant women, and those with disabilities.
- Kentucky Children’s Health Insurance Program (KCHIP): KCHIP provides healthcare coverage to uninsured children under the age of 19 whose families do not qualify for Medicaid but still struggle with healthcare costs.
- Kentucky Women’s Cancer Screening Program: This program provides breast and cervical cancer screenings to uninsured and underinsured women who are at high risk for these types of cancer.
If you are unsure about your eligibility for any of these programs or exemptions, you can contact the Kentucky Cabinet for Health and Family Services for more information.
| Program | Description | Eligibility Requirements |
|---|---|---|
| Medicaid | Healthcare coverage for low-income individuals and families. | Must meet income and residency requirements. |
| KCHIP | Healthcare coverage for uninsured children under 19 whose families do not qualify for Medicaid. | Must meet income and residency requirements. |
| Kentucky Women’s Cancer Screening Program | Screenings for uninsured and underinsured women at high risk for breast and cervical cancer. | Must meet income and residency requirements and be at high risk for cancer. |
By taking advantage of these programs and exemptions, Kentucky residents can ensure that they have access to the healthcare they need without worrying about overwhelming costs or tax burdens.
Agricultural tax exemptions in Kentucky
Agriculture is a vital sector in the economy of Kentucky. It is responsible for providing food, creating jobs and generating income. To encourage the growth and development of this sector, the state of Kentucky provides certain tax exemptions and incentives to farmers. Here are some of the agricultural tax exemptions available in Kentucky:
- Farm machinery and equipment- farmers are exempted from paying sales tax on their purchases of machinery, equipment, and implements used in farm production. Farmers can save up to 6% on every purchase.
- Livestock and poultry- farmers can also enjoy tax exemptions on the purchase of livestock and poultry. The exemptions are applicable to purchases of breeding stock and breeding animals.
- Feed, seed and fertilizer- farmers can also get exemptions on their purchases of feed, seed, and fertilizers used in the production of agricultural products.
Additionally, Kentucky offers property tax exemptions to farmers who have agricultural lands. These exemptions are designed to reduce the property tax paid by farmers who actively farm their land. The exemption allows farmers to pay based on a reduced valuation rate of their farm land.
Moreover, Kentucky also offers incentives to farmers who engage in sustainable practices such as conservation tillage. Farmers who practice sustainable agriculture can receive credits on their income and sale taxes. These credits are meant to encourage the use of sustainable farming practices that are beneficial to the environment.
Summary
These agricultural tax exemptions in Kentucky are designed to help farmers save on their expenses and provide them with incentives for sustainable farming practices. Farmers in Kentucky can take advantage of several tax exemptions on their purchases of farming inputs and machinery. Additionally, the property tax exemption and incentives for sustainable farming are further examples of the ways in which Kentucky is committed to supporting its agriculture industry.
| Tax Exemption | Purpose |
|---|---|
| Farm machinery and equipment exemption | To reduce the cost of machinery and equipment for farmers |
| Livestock and poultry exemption | To reduce the cost of livestock and poultry for farmers |
| Feed, seed and fertilizer exemption | To reduce the cost of inputs for farmers |
These exemptions are designed to help farmers in Kentucky lower their expenses and produce more sustainably. They also provide incentives for farmers to adopt eco-friendly practices that benefit both the environment and their farms. With these agricultural tax exemptions, Kentucky’s agriculture sector can continue to grow and thrive for years to come.
Veteran Tax Exemptions in Kentucky
As a way of saying thank you to veterans for their service, Kentucky offers a number of tax exemptions to those who have served in the armed forces. Here are the details of what is not taxed for veterans in Kentucky:
- Property Tax Exemption: Kentucky veterans who are permanently and totally disabled as a result of military service are eligible for a property tax exemption on their homes. This exemption can be worth up to $37,600.
- Vehicle Sales Tax Exemption: Veterans who purchase a vehicle in Kentucky can receive a sales tax exemption on their purchase. To qualify for this exemption, the veteran must have a service-connected disability rating of at least 50% or be eligible for compensation for non-service connected disability.
- Income Tax Exemption: Kentucky veterans who are receiving disability payments from the VA are eligible for a state income tax exemption on those payments. This exemption applies to both disability compensation and pension payments.
In addition to these tax exemptions, Kentucky also offers a few other benefits to veterans:
- Free Tuition: Kentucky veterans who served on active duty during a wartime period and were honorably discharged are eligible for free tuition at any state-supported college, university, or vocational school in the Commonwealth.
- Military License Plates: Kentucky offers a variety of military license plates to veterans, including plates for Purple Heart recipients, former prisoners of war, and Medal of Honor recipients.
- Job Preference: Veterans who apply for state employment in Kentucky are given preference over non-veteran applicants.
For more information on these tax exemptions and benefits, veterans can contact their local county veteran affairs office or visit the Kentucky Department of Veterans Affairs website.
| Tax Exemption | Eligibility Criteria | Maximum Benefit |
|---|---|---|
| Property Tax Exemption | Permanent and total disability as a result of military service | $37,600 |
| Vehicle Sales Tax Exemption | Service-connected disability rating of at least 50% or eligible for compensation for non-service connected disability | Varies |
| Income Tax Exemption | Receiving disability payments from the VA | Varies |
Note: Maximum benefits are subject to change.
Educational Tax Exemptions in Kentucky
Kentucky offers a variety of educational tax exemptions for its residents. These exemptions can add up to significant savings for individuals and families who are paying for education.
- Income Tax Credit for Education Expenses: Kentucky allows taxpayers to claim a credit up to $1,000 per household for expenses incurred for a dependent’s elementary or secondary school tuition, textbooks, and other necessary education supplies.
- College Tuition Tax Credit: Kentucky offers a tax credit of up to $500 for college tuition paid for a dependent. The credit is available for full-time students attending a Kentucky public or private college or university, and the credit can be claimed for up to four years.
- 529 Plan Contributions: Kentucky residents can claim up to $1,000 in tax deductions per year per beneficiary for contributions to a Kentucky Educational Savings Plan Trust account, also known as a 529 plan.
These exemptions can provide important savings to families who are trying to ensure their children receive a quality education and help mitigate the cost of tuition and related expenses. Kentucky’s tax policies aim to make it easier for residents to afford education, from elementary school all the way through college.
Kentucky’s Tax Exempt Schools
Kentucky also has several educational institutions that are exempt from paying taxes. These institutions range from private colleges to elementary and secondary schools, and they can help reduce the cost of education for families and individuals who attend them.
Below is a table of the top tax-exempt educational institutions in Kentucky:
| Institution | Type | Location |
|---|---|---|
| University of Kentucky | Public University | Lexington, KY |
| University of Louisville | Public University | Louisville, KY |
| Berea College | Private Liberal Arts College | Berea, KY |
| Centre College | Private Liberal Arts College | Danville, KY |
| Thomas More University | Private Catholic University | Crestview Hills, KY |
By exempting these institutions from paying taxes, Kentucky helps ensure that their resources are dedicated to providing quality educational programming and reducing the cost of tuition for students and families.
What is Not Taxed in Kentucky?
1. Clothing and footwear
Kentucky does not tax clothing and footwear up to $75 per item. This means that you can save money while shopping for clothes and shoes.
2. Prescription medications
If you have a prescription for medication, it is exempt from sales tax in Kentucky. This can help alleviate the financial burden of medical expenses.
3. Food for home consumption
Food items that are purchased for home consumption are exempt from sales tax in Kentucky. This includes groceries, meat, dairy products, and other food items.
4. Medical devices
Medical devices that are designed to alleviate, prevent, or treat a medical condition are exempt from sales tax in Kentucky. This includes items such as hearing aids and blood glucose monitors.
5. Water, electricity, and gas
Utilities such as water, electricity, and gas are not subject to sales tax in Kentucky. This means that your monthly utility bills will not be taxed.
6. School textbooks and instructional materials
When purchasing textbooks and instructional materials for school use, Kentucky does not charge sales tax. This can help students and parents save money on educational expenses.
Closing Thoughts
Thanks for reading about what is not taxed in Kentucky! Remember to keep these items in mind when making purchases in the state to help save money. If you ever have questions about tax-exempt items, be sure to consult with a tax professional. Visit again soon for more helpful tips and information!