Kentucky LLC Taxes Explained: 3.5% Flat + the LLET
Kentucky LLC owners may face state income tax, federal tax, the entity-level LLET, local occupational taxes and sales-tax duties. Kentucky’s 2026 individual income-tax rate is 3.5%. The illustration below covers selected taxes only; it is not a complete combined tax bill.
Default LLC income generally passes through to owners. Kentucky’s 2026 individual rate is 3.5%, with a $3,360 basic standard deduction. LLET is a separate entity tax, generally with a $175 minimum subject to exemptions and its full gross-receipts/gross-profits computation. Local occupational taxes depend on actual activity and locality. Sales/use tax is 6% on taxable transactions. Compare any S-corporation or PTE election using actual facts.
- State income tax
- 3.5% flat (2026)
- LLET minimum
- $175/yr
- Self-employment tax
- 15.3% federal
- Sales tax
- 6% — no local add-ons
- Louisville / Lexington occ.
- ~2.2% / 2.25%
- S-Corp threshold
- Model actual wages and costs
The 5 Layers of Kentucky LLC Taxation
Federal: income + self-employment tax
Default active business income may attract federal self-employment tax as well as federal income tax. Social Security has an annual wage base; Medicare and additional-Medicare rules differ. The illustration assumes no other wages and excludes federal income tax.
Kentucky individual income tax: 3.5% for 2026
For 2026, Kentucky applies a 3.5% individual income-tax rate and a $3,360 basic standard deduction. State adjustments, credits, filing status and classification can change the actual return.
The LLET: Kentucky's entity tax
The Limited Liability Entity Tax (KRS 141.0401) hits the LLC itself — $175 minimum for most LLCs, calculated on gross receipts or gross profits above $3M. Detail below.
Local occupational taxes
Cities and counties tax net profits earned in their jurisdiction — Louisville ~2.2%, Lexington 2.25%, most others at their own rates. See Step 7.
Sales tax: 6% flat, if applicable
Collected from customers on taxable goods and many services. One statewide rate, zero local add-ons.
Estimate Your Combined Bill
Kentucky LLC Tax Estimator
Single-member default taxation · 2026 rates · educational estimate
Limited 2026 illustration for a default single-member LLC owner, assuming no other wages or income. Caps Social Security at the $184,500 wage base, deducts half the illustrated SE tax and the $3,360 Kentucky basic deduction, then applies 3.5%. Includes only an illustrative $175 LLET minimum and the selected local-rate assumption. It does not compute full LLET, local tax adjustments, federal income tax, QBI, credits, additional Medicare tax or the elective PTE tax. Confirm local rates and the actual return separately.
The LLET In Depth (KRS 141.0401)
The Limited Liability Entity Tax is Kentucky's price tag on liability protection — nearly every LLC, S-Corp, and C-Corp owes it, while sole proprietorships and general partnerships don't.
| Kentucky Gross Receipts | Your LLET |
|---|---|
| $3 million or less | $175 flat minimum |
| Above the thresholds | Lesser of 0.095% of gross receipts or 0.75% of gross profits (never below $175) |
- It applies at $0 profit. The $175 minimum is owed even in loss years — it's based on existence, not income.
- Filed with your Kentucky return via the applicable LLET forms (Form 725/PTE family for pass-through LLCs), generally due the 15th day of the fourth month after year-end for single-member LLCs on your schedule, with pass-through entity returns on the entity calendar.
- Check current LLET law and instructions — a proposed bill does not create an exemption. Confirm the applicable current DOR requirements before computing the entity tax.
Compare an S-Corporation Election
An S-corporation election changes federal tax classification and adds reasonable-compensation, payroll and filing duties. Compare actual wages, distributions and compliance costs rather than using a universal profit threshold. Kentucky LLET and state/local obligations remain separate. Eligible pass-through entities can also review the annual Kentucky PTE election and Form 740-PTET pathway; that election differs from default owner-level taxation.
Your Kentucky Tax Calendar
| Date | What's Due |
|---|---|
| Jan 15 / Apr 15 / Jun 15 / Sep 15 | Quarterly estimated taxes — federal and Kentucky, on pass-through profit |
| Mar 15 | Form 1065 (multi-member LLCs) + pass-through entity returns with LLET |
| Apr 15 | Form 1040 + Kentucky individual return (single-member LLCs) with LLET filing |
| Jun 30 | $15 Annual Report — Secretary of State (window opens Jan 1) |
| Monthly/Quarterly | Sales tax remittance + local occupational withholding, per your assigned schedule |
Planning note: model the actual state income-tax base, LLET, applicable occupational taxes, federal taxes and sales-tax responsibilities separately. A selected-rate illustration cannot establish a reliable tax reserve or a complete return.
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Kentucky 2026 Inputs and PTE Election
Kentucky’s 2026 individual rate is 3.5%, and the basic standard deduction is $3,360. An eligible pass-through entity may elect annual entity-level taxation through the current Form 740-PTET process. Review owner credits, election timing, payment rules and the separate Form PTE/LLET obligations. The default owner-level illustration does not model that election.
Kentucky PTE election and filing guidance.
Kentucky LLC — FAQ
Ahmad Adil is the founder and CEO of LLC School. For filing and ongoing compliance, confirm the requirements with the responsible state agency. This is educational information, not legal or tax advice.
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