State retirement taxes · 2026
Does Kentucky tax retirement income?
Short answer: Partly. Kentucky does not tax Social Security benefits. Up to $31,110 per person of pension, IRA and 401(k) income is excluded, at any age.
What’s taxed in Kentucky
2026 rules.
- Social SecurityNot taxed
- Kentucky does not tax Social Security benefits.
- PensionsPartly taxed
- Up to $31,110 per person of pension, IRA and other retirement income is excluded, at any age.
- IRA & 401(k) withdrawalsPartly taxed
- IRA and 401(k) withdrawals share the same $31,110-per-person exclusion; the excess is taxed at 3.5%.
- Military retirement payPartly taxed
- Military pensions share the $31,110 exclusion, plus full exclusion of the part tied to service before 1998 — retired military may be able to exclude more than $31,110.
- Income tax rate3.5% flat
- A flat 3.5% for 2026, down from 4.0% in 2025.
Does Kentucky tax Social Security?
Kentucky does not tax Social Security benefits.
Social Security and Railroad Retirement Board benefits included in income are subtracted on Schedule M, with no age or income limit.
Your federal return is a separate question — see how much of your benefit the IRS taxes with the taxable Social Security calculator.
Are pensions taxed in Kentucky?
Up to $31,110 per person of pension, IRA and other retirement income is excluded, at any age.
The exclusion is 100% of taxable retirement benefits or $31,110, whichever is less, per taxpayer, with no age requirement. It covers public and private pensions, annuities, IRAs, 401(k)s, deferred compensation, disability retirement and Roth conversions. Federal, Kentucky state and local government pensions earned through service before January 1, 1998 are fully excludable (Schedule P). The $31,110 is fixed in law, not indexed.
Public vs. private pensions: Same $31,110 cap for both; government service before 1998 is fully excludable.
Are IRA and 401(k) withdrawals taxed in Kentucky?
IRA and 401(k) withdrawals share the same $31,110-per-person exclusion; the excess is taxed at 3.5%.
Roth conversions are covered by the exclusion too.
Required minimum distributions (RMDs) are IRA and 401(k) withdrawals, so the same rules apply. Estimate your RMD.
Is military retirement pay taxed in Kentucky?
Military pensions share the $31,110 exclusion, plus full exclusion of the part tied to service before 1998 — retired military may be able to exclude more than $31,110.
What is Kentucky’s income tax rate?
A flat 3.5%.
A flat 3.5% for 2026, down from 4.0% in 2025. Further half-point cuts need budget triggers plus legislative action; the triggers were not met in 2025 or 2026, so 3.5% continues for 2027 and 2028 unless lawmakers change it.
Standard deduction and exemptions
Standard deduction: $3,360 for 2026 ($3,270 for 2025), indexed. No personal exemption — personal tax credits instead.
What tax breaks do seniors get in Kentucky?
A $40 personal tax credit for each filer 65+ (another $40 if blind). A family size tax credit helps low-income households; its income limits vary by family size.
What changed for 2026?
HB 1 (2025) set the 3.5% rate for 2026. 2026 bills to raise the pension exclusion to $41,110 (HB 183) or create graduated rates did not advance.
Official for 2026.
What we couldn’t confirm
- The family size tax credit’s income limit was not checked against a primary source, so we don’t show a dollar figure.
How Kentucky compares with its neighbors
Thinking of moving across the line? Here’s how each bordering state treats retirement income in 2026.
- KentuckyThis pageVery friendlySocial Security Not taxedTop rate: 3.5% flat
- IllinoisVery friendlySocial Security Not taxedTop rate: 4.95% flat
- IndianaFriendlySocial Security Not taxedTop rate: 2.95% flat
- MissouriFriendlySocial Security Partly taxedTop rate: 4.7% top
- OhioFriendlySocial Security Not taxedTop rate: 2.75% flat
- TennesseeTax-free retirement incomeSocial Security Not taxedTop rate: None
- VirginiaFriendlySocial Security Not taxedTop rate: 5.75% top
- West VirginiaFriendlySocial Security Not taxedTop rate: 4.58% top
State tax is half the picture — check the federal side
Kentucky retirement tax questions
Is Kentucky tax-friendly for retirees?
We rate Kentucky “Very friendly” for 2026. Kentucky does not tax Social Security benefits. Up to $31,110 per person of pension, IRA and 401(k) income is excluded, at any age. The top income tax rate is 3.5%.
Are required minimum distributions (RMDs) taxed in Kentucky?
RMDs are withdrawals from IRAs and 401(k)-type plans, so they follow Kentucky’s rules for those accounts. IRA and 401(k) withdrawals share the same $31,110-per-person exclusion; the excess is taxed at 3.5%.
Is military retirement pay taxed in Kentucky?
Partly. Military pensions share the $31,110 exclusion, plus full exclusion of the part tied to service before 1998 — retired military may be able to exclude more than $31,110.
What is Kentucky’s income tax rate for 2026?
A flat 3.5% for 2026, down from 4.0% in 2025. Further half-point cuts need budget triggers plus legislative action; the triggers were not met in 2025 or 2026, so 3.5% continues for 2027 and 2028 unless lawmakers change it.
Sources for Kentucky
Primary sources only. We re-check them whenever an agency publishes new figures.
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