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FRANKFORT, Ky. (April 1, 2021) -- All unemployment compensation earned as a Kentucky resident is subject to Kentucky income tax. For Kentucky residents, any amount excluded up to the $10,200 on a taxpayer's federal income tax return is required to be added back on the Kentucky individual income tax return on Schedule M, Line 5 as an "Other Addition". For part-year Kentucky residents, the amount should be included on the Form 740-NP, Section B, Column B, line 13 as unemployment compensation.
Q: Does Kentucky follow "same as federal" income tax position which allows up to $10,200 of unemployment compensation received in 2020 to be excluded from gross income?
A: No. All unemployment compensation earned as a Kentucky resident is subject to Kentucky income tax. For Kentucky residents, any amount excluded up to the $10,200 on a taxpayer's federal income tax return is required to be added back on the Kentucky individual income tax return on Schedule M, Line 5 as an "Other Addition". For part-year Kentucky residents, the amount should be included on the Form 740-NP, Section B, Column B, line 13 as unemployment compensation. The Kentucky General Assembly would have to adopt this amendment to the Internal Revenue Code by amending KRS Chapter 141 to enact the particular provision at issue before Kentucky taxpayers could take the same exclusion on their Kentucky income tax returns for 2020 and 2021, and for fiscal taxable years ending on or after March 27, 2020, but before taxable years beginning January 1, 2022.
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