Individual Income Tax

Common Kentucky Individual Income Tax Credits

There are four common nonrefundable individual income tax credits available for taxpayers when the tax return is filed.

• Personal and Dependency Credits
• Nonrefundable Family Size Tax Credit
• Education Tuition Credit
• Child and Dependent Care

Personal and Dependency Credits

Personal tax credits are reported in Section B of form 740 and 740NP. A credit of $10 is allowed for each personal and dependency credit claimed.

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

M​embers of the Kentucky National Guard may claim an additional credit of $20; military reserve members are not eligible.

KRS 141.020

Nonrefundable Family Size Tax Credit

The Family Size Tax Credit is based on modified gross income and the size of the family. If total modified gross income is $32,718 or less for 2017, you may qualify for the Kentucky Family Size Tax Credit.

KRS 141.066

Education Tuition Tax Credit

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

Child and Dependent Care Credit

Kentucky taxpayers claiming the child and dependent care credit must file Form 740 or 740-NP as this credit cannot be taken on Form 740-EZ. The credit is claimed on Line 25 - Form 740 or Form 740 NP by entering the amount of the federal credit from federal Form 2441 or Form 1040A, Schedule 2 and multiplying by 20%.

KRS 141.067

To learn more about the credits available on the federal income tax return, including the earned income tax credit (EITC), please visit www.irs.gov.

FORM 1099G

If you received a Kentucky income tax refund last year, we’re required by federal law to send Form 1099G to you to remind you that the state refund must be reported as income on your federal tax return if you itemize deductions.

When you itemize deductions on your federal return you are allowed to deduct state income taxes or sales taxes that you paid during the year. This deduction reduces your federal taxable income. If any part of the state income taxes you deducted on your federal return is later refunded to you that amount must be reported as taxable income for the year in which the refund is issued.

Form 1099G reflects all Kentucky refunds that were credited to you for last year including refunds from amended returns and prior year returns. The form will include any or all of your refund that was applied to the following:

• estimated tax account
• use tax
• child support debt
• delinquent tax liability or another bill

Even if your refund was applied to offset a bill or make a donation federal law maintains that you received the benefit of the refund and you must report it as income.

You don’t need to attach the 1099G form to your federal or state income tax returns. Just keep it for your records. If you use a professional tax preparer, please give the form to your preparer, along with your W-2s and other tax information. If your address on the form is incorrect or you have other questions please contact the Kentucky Department of Revenue.​​​​​​

The Military Spouses Residency Relief Act (MSRRA) (Public Law 111-97) was signed into law on Nov. 11, 2009. This new law is effective for taxable year 2009. The MSRRA allows the same residency benefits permitted to military personnel under the Service members Civil Relief Act (SCRA) to also apply to a military spouse's nonmilitary service income, under certain circumstances.

The MSRRA prohibits a service member's spouse from either losing or acquiring a residence or domicile for purposes of taxation because he or she is absent or present in any U.S. tax jurisdiction solely to be with the service member in compliance with the service member's military orders, if the residence or domicile is the same for the service member and the spouse. The ​MSRRA also prohibits a spouse's income from being considered income earned in a tax jurisdiction if the spouse is not a resident or domiciliary of such jurisdiction when the spouse is in that jurisdiction solely to be with a service member serving under military orders.

Military spouses who fall under this law should file Form 740-NP Kentucky Individual Income Tax Nonresident or Part-Year Resident Return to request a refund of the Kentucky income tax withheld from his or her pay. The income would not be reported as taxable on the Kentucky income tax return. To assist the department in identifying those returns, please write across the top of the return MILITARY SPOUSE. For 2010, those military spouses should file a new Form K-4 with his or her employer to claim the exemption from withholding of Kentucky income tax. The updated K-4 Form will be available on our Web site by Dec. 11. Please address any further questions to the Taxpayer Assistance Section at (502) 564-4581.

Effective for taxable years beginning on or after Jan. 1, 2010, all military pay received by active duty members of the Armed Forces of the United States, members of reserve components of the Armed Forces of the United States, and members of the National Guard will be exempt from Kentucky income tax. KRS 141.010(10)(u)

Soldiers will claim the exemption by excluding military pay when filing a Kentucky individual income tax return starting with the 2010 return, due on April 18, 2011.  Provided the military member has no income other than military pay, he or she would not be required to file a Kentucky income tax return.  The military pay exemption applies to all Kentucky military members regardless of where the member is stationed.  Kentucky income tax should no longer be withheld from checks received for military pay, beginning Jan. 1, 2010.  If Kentucky income tax is incorrectly withheld from a soldier’s military pay in 2010 and after, the Department of Revenue will refund the tax withheld.​​

Use Tax on Individual Income Tax Return

Kentucky Use Tax may be due on internet, mail order, or other out-of-state purchases made throughout the year.  Please click here to see if you are required to report Kentucky Use Tax on your Individual Income Tax Return. 

Also see line 27 of Form 740 and page 12 of the 740 Packet for the Optional Use Tax Table and the Use Tax Calculation Worksheet.