Tags: Retirement | retirement | kentucky | taxes

Taxes for Retirement in Kentucky

By    |   Friday, 26 Feb 2016 07:31 PM

Kentucky retirees' tax burden may be middle-of-the-road nationally, but retirement there can make good economic sense if you also consider the state's low cost of living.

Here is what you need to know about inheritance, income, sales, and property taxes in Kentucky.

1. Inheritance tax

Kentucky does have an inheritance tax, but the law allows for exemptions to spouses, children, siblings, and grandchildren.

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2. Income tax

State income tax exemptions and deductions are very generous to retirees. Social Security, Roth individual retirement account proceeds, and railroad retirement benefits are all totally exempt from state taxes. Personal tax credits are $20 for single adults, $40 for married couples, and $20 for each dependent. However, those age 65 and older can take an additional tax credit of $40. Taxpayers can either itemize deductions or take a $2,360 standard deduction.

Kentucky also offers an exclusion of up to $41,100 for civil service, state and local government, military, and qualified private pensions and annuities, according to the Retirement Living Information Center.

There isn't any additional deduction for elderly or blind taxpayers, but taxpayers can deduct any medical or dental expenses that are greater than 7.5 percent of adjusted gross income, along with medical and dental health insurance and long-term care insurance premiums.

3. Sales tax

Kentucky's marginal sales tax is a not-inconsequential 6 percent. However, food is exempt, as are utilities, except for telephones. Also exempt are prescription drugs and medical supplies, both common essentials for many retirees, states the Retirement Living Information Center.

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4. Property tax

The Bluegrass State is the fourth-lowest in the U.S. for state property taxes on a per capita basis and the 14th-lowest for state property taxes as a percentage of home value. The state charges a real property tax rate of 13.6 cents for each $100 of assessed value, explains the Retirement Living Information Center.

However, Kentucky also has a homestead exemption on the assessed value of qualifying single-unit residential property. This is adjusted every two years. For homeowners who are 65 years of age or older or totally disabled, $34,000 of the assessed value of their property is exempt from state property taxes under this provision. Real estate is also subject to local property taxes.

Meanwhile, the median price for a house is only $140,300 in the Bluegrass State, and in smaller cities and towns, two-bedroom homes can be purchased for less than $50,000, according to MyMove.

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Kentucky retirees' tax burden may be middle-of-the-road nationally, but retirement there can make good economic sense if you also consider the state's low cost of living.
retirement, kentucky, taxes
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2016-31-26
Friday, 26 Feb 2016 07:31 PM
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