The following highlights individual taxes for Fayette County residents. For more details on these tax rates, as well as taxes related to businesses, contact Commerce Lexington Inc. at (800) 341-1100.
Property Tax
Kentucky's state and local property tax system differs from those of most states. State government taxes all property not specifically exempt by the state constitution, and local governments are allowed to tax only a few classes of property. The basis of assessments for property taxes in Kentucky is 100 percent of fair cash value. State and County governments split the responsibility of assessing value. Assessments are based upon most property held on January 1 annually. Taxpayers are required to report the value
of all of their taxable property to the local property valuation administrator (PVA) annually. Please see the following page for detailed property tax information in Fayette County.
Sales Tax
A state sales tax of 6.0% is paid by the consumer at final sale on taxable goods and services and when tangible personal property is leased or rented in Kentucky. Local sales taxes are not levied in Kentucky. Major exemptions from the state sales tax, important to industry in Kentucky, include: items purchased for resale; machinery for new and expanded manufacturing, raw materials, industrial supplies, tools; energy and energy producing fuels (to the extent that they exceed 3 percent of the cost of production),
certified pollution control equipment; manufacturing and mining machinery sold to out of state customers; containers, packaging, wrapping materials; and, motor fuels for highway use. Credit is given for sales taxes paid out of state if the other state grants similar credits for taxes paid in Kentucky.
Sole Proprietorships and Partnerships
The income of sole proprietorship and partnerships is exempt from state corporation income taxes. Instead, the owners pay state individual income taxes on their shares of the earnings of the businesses, regardless of whether they take the income for their personal use or leave it in the business. Although general partnerships have no state income tax liability, they must file an information return annually.
Personal Income Tax
Resident individuals must pay on their entire income, while nonresidents must pay tax on that portion of income derived from Kentucky sources. There does exist reciprocal state exemptions that apply to some non-resident incomes.
Payroll & Net Profits Tax
Payroll/Net Profits tax rates vary by geographic locale within the Lexington MSA. The county rates will vary from a low of .75% in Bourbon County to a high of 2.75% in Lexington-Fayette County. The city rates also vary from 0% in several small municipalities to 2% in Wilmore, Richmond, Berea and Midway. All shown include a net profits tax except for the City of Winchester, which does not tax net profits, and the City of Nicholasville, which uses a gross receipts schedule to determine local business taxes.