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Kentucky has a flat 4.0% income tax (reducing toward 3.5% in 2026) plus local occupational taxes in Louisville, Lexington, and many other jurisdictions. Rippling handles KY DOR, KEWES, and local occupational tax filings.
Kentucky is a major economy with strengths in manufacturing (Toyota, Ford, UPS hub), logistics, bourbon/agriculture, and healthcare, with Louisville and Lexington as the primary business hubs. Kentucky payroll is defined by a flat income tax (4.0% in 2024, reducing toward 3.5% by 2026), local occupational taxes in many cities and counties, and no state-mandated paid leave. Kentucky is a right-to-work state.
Rippling’s Kentucky payroll module provides:
| Contribution | Rate | Notes |
|---|---|---|
| FUTA | 6.0% (net 0.6%) | After SUTA credit; first $7,000 |
| KY SUI (KEWES) | New employer 2.7% | On first $11,400 of wages (2024) |
| Social Security | 6.2% | Up to $168,600 (2024) |
| Medicare | 1.45% | No wage base limit |
| Workers’ Compensation | Varies by risk class | Required for most employers with employees |
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| Contribution | Rate | Notes |
|---|---|---|
| Federal Income Tax | Graduated 10–37% | Per W-4 |
| Social Security | 6.2% | Up to $168,600 (2024) |
| Medicare | 1.45% + 0.9% surtax | Surtax above $200K single |
| Kentucky State Income Tax | 4.0% flat | Reduced from 4.5% (2024); further reducing to 3.5% (2026) pending revenue triggers |
| Kentucky Local Occupational Tax | Varies (0.5–2.5%) | Many KY cities and counties levy a local occupational license fee (earnings tax) on wages |
| Kentucky Income | KY Rate |
|---|---|
| All income | 4.0% flat (2024) |
Plus local occupational tax (0.5–2.5%+) based on employee work location. KY withholding remitted to KY DOR. Annual K-5 reconciliation.
Final Pay: Kentucky requires final pay on the next regular payday. Accrued vacation: Kentucky Wages and Hours Act treats promised vacation as wages if the employer’s policy provides for payout.
Many Kentucky cities and counties levy a local occupational license fee (effectively an earnings tax) on wages. Louisville/Jefferson County: 2.2% (city) + county rate. Lexington-Fayette Urban County: 2.25%. Other jurisdictions: 0.5–2.5%. These are withheld by the employer and remitted to the local jurisdiction. Rippling tracks KY local occupational taxes by employee work location.
Kentucky’s flat income tax rate was 5% until 2023, then reduced to 4.5% (2023), then 4.0% (2024). Further reductions to 3.5% are planned for 2026 (pending revenue triggers). Kentucky is pursuing a long-term goal of eliminating the individual income tax. Rippling updates KY withholding annually.
Kentucky’s minimum wage is $7.25/hour — matching the federal minimum. Kentucky has not enacted a state minimum above the federal floor. Louisville and Lexington do not have local minimums above state.
Kentucky requires workers’ comp coverage for most employers with one or more employees. The Kentucky Department of Workers’ Claims administers the system. Coverage through private insurers or the Kentucky Coal Workers’ Pneumoconiosis Fund (for mining). Rates vary by occupation risk classification.
