Kentucky Department of Revenue Kentucky Department of Revenue Kentucky Department of Revenue Kentucky Department of Revenue

Withholding Tax

During the 2005 Regular Session, Governor Ernie Fletcher proposed and the General Assembly enacted changes to individual income tax rates and a family size tax credit to replace the low income tax credit. When Governor Fletcher signed House Bill 272 on March 18, 2005, these changes became effective for taxable years beginning on or after January 1, 2005.

INDIVIDUAL INCOME TAX RATE CHANGE—The rate for taxable income between $8,000 and $75,000 is reduced to 5.8 percent, with taxable income over $75,000 continuing to be taxed at 6 percent. The revised 2005 Withholding Tax Tables will be published on the Department of Revenue’s Web site on June 20, 2005. These tables reflect the $1,910 standard deduction and the new tax rate.

Family Size Tax Credit is based on modified gross income (MGI) and the size of the family. MGI is equal to federal adjusted gross income plus any interest income from other states’ municipal bonds and pension income from a qualifying lump-sum distribution. Single individuals whose MGI and married couples whose combined MGI is at or below federal poverty level for their family size will receive a 100 percent tax credit. The 2005 MGI levels that qualify for the 100 percent tax credit are:

Size of Family Unit



an individual either single or married living apart from his or her spouse for the entire year

$ 9,570


an individual with one dependent child or a married couple



an individual with two dependent children or a married couple with one dependent child


4 or more

an individual with three dependent children or a married couple with two dependent children


Changes have been made to the Special Withholding Exemption Certificate (Form K-4E) to reflect the new
Family Size Tax Credit. An employee may be entitled to claim exemption from the withholding of Kentucky
income tax if no income tax liability is anticipated for the current year and the employee meets the modified gross income requirements as shown above. The maximum modified gross income eligible for exemption of withholding tax is $19,350 for a family of four or more.

Withholding Tax Tables


Last Updated 8/15/2006