Skip to main navigation Skip to main content

Tax Credits

​​Individual

The purpose of the Kentucky Angel Investor Tax Credit program is to encourage qualified individual investors to make capital investments in Kentucky small businesses, create additional jobs, and promote the development of new products and technologies.  More Information

KRS 141.396​

Kentucky taxpayers claiming the child and dependent care credit must file Form 740 or 740-NP. The credit is claimed on Line 25 of Form 740 or Form 740-NP by entering the amount of the federal credit from federal Form 2441 and multiplying by 20%.

KRS 141.067​

Kentucky residents are required to report all income received, including income from sources outside Kentucky. Within certain limitations, a credit for income tax paid to another state may be claimed. The credit is limited to the amount of Kentucky tax savings had the income reported to the other state been omitted, or the amount of tax paid to the other state, whichever is less. You must include a copy of the other state's return with your filed Form 740 or Form 740-NP to claim this credit.  See the Instructions for Form 740 or Form 740-NP for further information.

A credit equal to 25 percent of the amount of the federal American Opportunity Credit and the Lifetime Learning Credit is available. The credit applies only to undergraduate studies, phases out for higher incomes, applies to most higher education opportunities within Kentucky and may be carried forward for up to five years.

KRS 141.069​

Many flow through business credits are available to certain individual taxpayers.  Learn more.​​

​A sole proprietor reporting business income or loss on federal Schedule C (Form 1040) who timely paid tangible personal property taxes on business inventory to a taxing jurisdiction in Kentucky may claim a credit for inventory tax paid against individual income tax. An individual may also claim the credit if it is passed through from a partnership, LLC, or S-Corporation on a Kentucky Schedule K-1. The credit is phased in with a 25% credit allowed in 2018, 50% in 2019, 75% in 2020, and 100% in 2021 and thereafter. More Information

The Family Size Tax Credit is based on modified gross income and the size of the family. If total modified gross income is $33,383 or less for 2018, you may qualify for the Kentucky Family Size Tax Credit.

KRS 141.066​

An individual that is a partner, member or shareholder of a limited liability pass–through entity is allowed a limited liability entity tax (LLET) credit against the income tax imposed by KRS 141.020 equal to the individual’s proportionate share of LLET computed on the gross receipts or gross profits of the limited liability pass–through entity as provided by KRS 141.0401(2), after the LLET is reduced by the minimum tax of $175 and by other tax credits which the limited liability pass–through entity may be allowed. The credit allowed an individual that is a partner, member or shareholder of a limited liability pass-through entity against income tax shall be applied only to income tax assessed on the individual’s proportionate share of distributive income from the limited liability pass–through entity as provided by KRS 141.0401(3)(b). Any remaining LLET credit shall be disallowed and shall not be carried forward to the next year. See the Instructions for Form 740 or Form 740-NP for further information.

Personal tax credits are reported on Schedule ITC for any person who is age 65 or over, blind, or in the Kentucky National Guard.

A $40 credit is allowed for each individual reported on the return who is age 65 or over. A $40 credit is allowed if an individual is legally blind. Persons that are both age 65 or older and legally blind are eligible for both a total credit of $80 per person.

Members of the Kentucky National Guard may claim a credit of $20; military reserve members are not eligible.

KRS 141.020

Business

Qualifying taxpayers who produce and blend biodiesel may be entitled to this tax credit.  More Information

A credit available for qualifying producers of cellulosic ethanol. More Information
Qualifying taxpayers who perform certified rehabilitations to structures that are listed in the National Register of Historic Places or are located in a National Register historic district may be entitled to this tax credit. More Information
Credit is allowed for coal purchased to be used by an electric power company certified as a clean coal facility by the Energy and Environment Cabinet. More Information
Qualifying business taxpayers that convert boilers from other fuels to Kentucky coal or that substitute Kentucky coal for other fuels in a boiler capable of burning coal and other fuels to produce energy for specific purposes may be entitled to this credit. More Information
This credit has expired.

​The Decontamination tax credit is a refundable credit for a taxpayer making a qualifying expenditure at a qualifying decontamination property to encourage investment in and decontamination or remediation of qualifying decontamination property.  Learn More

A nonrefundable and nontransferable credit that may be claimed by income taxpayers who pay Kentucky property tax on distilled spirits. More Information
Certain credits are available for taxpayers that have projects approved by the Kentucky Economic Development Finance Authority or Bluegrass State Skills Corporation.  More Information​
Employers that assist employees in completing a learning contract in which the employee agrees to obtain a high school equivalency diploma may be eligible for this credit. More Information​
Employers that hire unemployed Kentucky residents may be eligible for this tax credit. More Information​
Effective for taxable years beginning on or after January 1, 2011, the Endow Kentucky Tax Credit was created to encourage donations to community foundations across the Commonwealth. More Information
This credit is now expired. Any 2015 carryforward may be taken on a 2016 return. See Form 740 or Schedule TCS to claim a carryforward for tax year 2016.
This credit is now expired.

This credit has expired.

A credit available for qualifying producers of ethanol. More Information
Qualified productions can take advantage of a refundable income tax credit of 30-35% of approved expenditures. More Information
This tax credit has expired.

​A business that timely paid tangible personal property taxes on inventory to a taxing jurisdiction in Kentucky may claim a credit for inventory tax paid against individual income tax or corporation income tax and limited liability entity tax for tax years beginning on or after January 1, 2018. The credit is phased in with a 25% credit allowed in 2018, 50% in 2019, 75% in 2020, and 100% in 2021 and thereafter. More Information

Investors who make cash contributions to certain qualified investment funds certified by the Kentucky Economic Development Finance Authority (KEDFA) may be entitled to this credit. More Information
A taxpayer that makes a qualified equity investment in a qualified community development entity may be eligible for this credit. More Information
Certain taxpayers that construct and equip new facilities or expand or remodel existing facilities in Kentucky for qualified research purposes may be entitled to this credit. More Information
A credit of 25% of expenditures for expanding or upgrading railroad track to accommodate the transport of fossil energy resources or biomass resources. More Information
A credit of 50% of qualified expenditures paid or incurred by an eligible taxpayer during the taxable year to maintain or improve railroads located in Kentucky is allowed. More Information
Qualifying taxpayers who purchase recycling or composting equipment to be used exclusively in Kentucky for recycling or composting postconsumer waste materials may be entitled to a tax credit. More Information

​This credit is for a qualified taxpayer that produces renewable chemicals in Kentucky.  Learn more here.

Credit allowed for expenditures made at qualifying voluntary environmental remediation property through agreement with the Energy and Environment Cabinet. More Information

Inventory Tax Credit Calculator

DOR has developed a downloadable, Excel-based calculator to help taxpayers compute the inventory tax credit. The calculator will generate a completed Schedule INV and an accompanying supporting worksheet that should be attached to the return. 


Contact Us

​Business Credits

Phone: (502) 564-8139
Fax: (502) 564-0058
Email: KRC.WEBResponseEconomicDevelopmentCredits@ky.gov 

Individual Credits

Phone: (502) 564-4581
Fax: (502) 564-3685

Email: KRC.WEBResponseIndividual@ky.gov​


Inventory Tax Credit

Phone: (502) 564-1555
​Internal Revenue Service Logo
Looking for information about Federal Credits?
Visit IRS.gov​

Download the Taxpayer Bill of Rights

The Kentucky Department of Revenue conducts work
under the authority of the Finance and Administration Cabinet.

KY State Seal

© Commonwealth of Kentucky. All rights reserved.

Kentucky.gov