Kentucky meets conditions for lawmakers to cut income tax in 2026

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Republican lawmakers say Kentucky has met the financial conditions to set in motion another cut in the personal income tax rate that could take effect in 2026

FRANKFORT, Ky. — Kentucky has met the financial conditions needed to set in motion another cut in the state's personal income tax rate that could take effect in 2026, top Republican lawmakers said Wednesday.

State budget officials confirmed the financial triggers were satisfied, clearing the way for lawmakers to reduce the individual income tax rate to 3.5% from 4%, effective in January 2026, said Sen. Chris McDaniel. The GOP-dominated legislature can pass the rate cut when it reconvenes next year.

“Kentuckians know best how to spend their money and do so more efficiently than the government," McDaniel, chairman of the Senate Appropriations and Revenue Committee, said in a statement. «We are proud to help them and their families keep more of their hard-earned money.”

It's a reversal from a year ago, when the Bluegrass State failed to fully meet the financial conditions, meaning the income tax rate will hold steady at 4% this coming January.

Since Republican lawmakers passed a tax overhaul in 2022, the personal income tax has gradually been reduced by increments of a half-percentage point, conditioned on meeting benchmarks that ensure revenues are sufficient to meet state spending needs.

For many supporters of that landmark legislation, the goal has been to eventually phase out individual income taxes in Kentucky, shifting tax collections toward personal consumption and away from personal income. That 2022 measure also extended the state sales tax to more services.

House Appropriations and Revenue Committee Chairman Jason Petrie, the tax overhaul's lead sponsor,