Is Kentucky occupational tax the same as state income tax?
No. Kentucky state income tax is imposed statewide. Occupational tax is a local payroll tax set by a city or county and usually withheld where the wages are earned.
Kentucky local payroll tax
Kentucky Local Occupational Tax Calculator
Calculate Kentucky city and county occupational tax on a paycheck and see how local payroll taxes change take-home pay.
Calculate Kentucky local occupational tax
Build your paycheck
Kentucky · 2026 tax year · salaried or hourly
Kentucky’s 3.5% flat tax plus any city / county payroll tax.
Exempt from Kentucky State Tax?
Exempt state tax under reciprocity?
Kentucky has reciprocity agreements with Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, and Wisconsin. Out-of-state residents commuting to work in Kentucky are exempt from Kentucky state income tax, but still owe local occupational taxes.
Kentucky flat taxA single 3.5% rate applies to all wages after the $3,360 standard deduction — no brackets, so filing status doesn’t change the rate.
$
Based on where you physically work, not where you live.
Updates as you type
How is Kentucky local occupational tax calculated in 2026?
Kentucky local occupational taxes are usually charged on gross wages earned in the city or county.
The rate can differ even when two workers have the same state and federal tax situation.
Work location usually matters more than home address for occupational tax withholding.
Rate this calculator
How to work out Kentucky local occupational tax, step by step
1Enter gross pay and pay frequency.
2Select Louisville, Lexington, Covington, Bowling Green, Owensboro, or a custom local rate.
3Read the local tax line separately from federal, Kentucky state, Social Security, and Medicare.
Common questions about Kentucky local occupational tax
Can both a city and county tax apply?
In some Kentucky areas, multiple local rules can matter. Use the custom rate field when your payroll department or local ordinance gives you a combined effective rate.