Capital Gains Tax for Kentucky (2026)
Kentucky (KY) Key Facts
State Capital Gains Rate
4%
Taxed As
Ordinary income
Federal Rate Applies
Yes (0%, 15%, or 20%)
Long Term vs Short Term
Both taxed at state level
How This Calculator Works in Kentucky
This calculator estimates your combined federal and Kentucky capital gains tax. Enter your gain amount, holding period, and income to see your estimated tax.
Kentucky Overview
Kentucky taxes capital gains as ordinary income at its flat 4% rate. Federal capital gains taxes also apply, with long-term rates of 0%, 15%, or 20% depending on income. The combined state and federal burden should be considered when planning asset sales or investment strategies.
How Kentucky Compares
Kentucky's capital gains rate of 4% compares to Tennessee at 0% and Virginia at 5.75%. State capital gains taxes significantly impact net investment returns.
| State | Top Rate | Notes |
|---|---|---|
| Tennessee | 0% | Tennessee has a capital gains rate of 0%. |
| Virginia | 5.75% | Virginia has a capital gains rate of 5.75%. |
| Indiana | 3.05% | Indiana has a capital gains rate of 3.05%. |
Kentucky's capital gains rate of 4% compares to a national average of approximately 5.04%. This is below the national average.
Tips for Kentucky Residents
- 1Kentucky taxes capital gains as ordinary income at its flat 4% rate.
- 2Federal long-term gains (held 1+ year) are taxed at 0%, 15%, or 20%. Kentucky's state tax applies on top of the federal rate.
- 3Hold investments over one year to qualify for lower federal long-term rates rather than ordinary income rates.
- 4Tax-loss harvesting—selling losing investments to offset gains—reduces both federal and Kentucky state capital gains tax.
- 5Consider the combined federal + state rate when planning large asset sales. The total can exceed 27.8% for high earners.