Why do Kentucky paychecks vary so much by city?
Kentucky's statewide rate is flat, but local occupational taxes are set locally. Two employees with the same gross pay can have different net pay if one works in a higher-rate jurisdiction.
Rate lookup and comparison
Kentucky Occupational Tax Rates
Compare Kentucky occupational tax rates for major city paycheck scenarios and learn when local payroll tax applies.
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Kentucky · 2026 tax year · salaried or hourly
How much and how often you’re paid.
How are you paid?
Gross pay method
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Use flat 22% federal supplemental rate?
The IRS allows employers to withhold federal income tax from bonuses / supplemental wages at a flat 22% rate.
Required for accurate Social Security and Medicare surtax estimates mid-year.
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Key points
Covington, Lexington, Louisville, Bowling Green, and Owensboro all have different modeled local rates.
Occupational tax is commonly calculated as a percentage of taxable wages.
Local tax rules change by jurisdiction, so payroll records and city/county publications should control exact filing decisions.
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What to check
1Find the city or county where the wages are earned.
2Enter the occupational tax rate as a percentage when it is not preloaded.
3Use the annual view to estimate the full-year cost of local payroll tax.
Common questions
Do remote workers owe the office city's occupational tax?
It depends on where the work is performed and the local rules. Remote and hybrid arrangements should be confirmed with payroll or the local tax administrator.