Kentucky Capital Gains Tax: 2026 Rules and Calculator

Short answer: Kentucky taxes capital gains as ordinary income at a flat 3.5% for 2026, down from 4.0% for 2025 (KRS 141.020(2), as amended by 2025 HB 1). On top of that comes federal capital gains tax (0%, 15% or 20% for 2026 under IRS Rev. Proc. 2025-32, and up to 25% on building depreciation) and the 3.8% net investment income tax above $250,000 of income for married couples or $200,000 single (IRC 1411).

Kentucky capital gains tax calculator

Enter your sale: rental property, your home, land, a business, stock or collectibles. You get the 2026 tax in Kentucky (federal, the 3.8% tax and Kentucky tax) and the same sale spread over the years the buyer pays you. It runs in your browser on the same engine as our capital gains tax calculator.

Example loaded. Change any number to run yours.

What you are sellingRental or investment real estateYour home (Section 121 exclusion)LandA business you work inPublicly traded stock or fundsCollectibles (art, coins, gold, cars)

Sale price

Selling costs (commission, title, legal)

Your adjusted basis

What you paid plus improvements, minus depreciation or depletion taken. Inherited: the value at the date of death.

How long you have held itMore than 1 year1 year or less

State you will be taxed inAlabamaAlaskaArizonaArkansasCaliforniaColoradoConnecticutDelawareDistrict of ColumbiaFloridaGeorgiaHawaiiIdahoIllinoisIndianaIowaKansasKentuckyLouisianaMaineMarylandMassachusettsMichiganMinnesotaMississippiMissouriMontanaNebraskaNevadaNew HampshireNew JerseyNew MexicoNew YorkNorth CarolinaNorth DakotaOhioOklahomaOregonPennsylvaniaRhode IslandSouth CarolinaSouth DakotaTennesseeTexasUtahVermontVirginiaWashingtonWest VirginiaWisconsinWyoming

Filing statusMarried filing jointlySingleHead of household

Other income this year (before deductions)

Years the buyer pays you over (1 = all now)

Expected sale date

Kentucky taxes capital gains as ordinary income at a flat 3.5% for 2026, down from 4.0% for 2025 (KRS 141.020(2), as amended by 2025 HB 1). Source: Kentucky Revised Statutes 141.020, checked October 13, 2026. Federal: 2026 brackets per IRS Rev. Proc. 2025-32 (0%, 15% and 20% on long-term gain; 20% above $613,700 of taxable income married filing jointly); 25% cap on building depreciation, IRC 1(h)(1)(E); 28% cap on collectibles, IRC 1(h)(4); 3.8% net investment income tax above $250,000 married or $200,000 single, IRC 1411.

Estimated tax on this sale (2026), example in Kentucky

$401,886

You keep $1,538,114 after selling costs and tax. The tax is 23.1% of your gain.

Your gain

• Sale price less selling costs$1,940,000
• Less your basis$200,000
• Your taxable gain$1,740,000
• Long-term gain at 0%, 15% or 20%$1,740,000

The tax, line by line

• Federal income tax (incl. $14,066 AMT)$340,986
• Net investment income tax (3.8%)$0
• Kentucky tax$60,900
• Total tax$401,886
• You keep$1,538,114

All in one year vs spread over 10 years: tax of $401,886 against $321,900 when the buyer pays you over 10 years. You keep $79,986 more.

Get the REAL numbers

Hans Goldstein, EAAdmitted to practice before the IRS

Talk to capital gains expert Hans Goldstein, EA.

These are estimates. Have a qualified tax professional run your real numbers in a 15-minute scope call.

Why now: the closing date and how the buyer pays you are set before closing, and they decide how much Kentucky and federal tax this sale costs.

Book my 15-minute call

This is an estimate. Getting it right down to the tee takes your actual tax forms (returns, K-1s, depreciation schedules), a consult and a paid analysis. The first 15-minute scope call is free.

How Kentucky taxes capital gains in 2026

Kentucky taxes capital gains as ordinary income at a flat 3.5% for 2026, down from 4.0% for 2025 (KRS 141.020(2), as amended by 2025 HB 1).

Local tax: Kentucky cities and counties charge occupational license taxes on wages and business net profits; ask whether yours reaches the gain on a business sale.

Selling Kentucky property while living elsewhere: Kentucky taxes a nonresident on gain from real estate and other property located in Kentucky, so selling Kentucky property from another state still means a Kentucky return.

Worked example (computed October 13, 2026)

A single owner selling a business they run, at the new 3.5% rate. A single filer in Kentucky sells a business they work in for $2,000,000 with $60,000 of selling costs. Basis is $200,000, and other income is $140,000.

• Taxable gain: $1,740,000.
• All in one year (2026): $340,986 federal income tax, $0 net investment income tax and $60,900 Kentucky tax (3.5% of the gain): $401,886 in total, 23.1% of the gain.
• Spread over 10 years on a note: $321,900 of tax on the gain, so the seller keeps $79,986 more. Interest on the note is taxed separately.

What the calculator simplifies

It applies the rule above to the whole gain for one sale in 2026. It also leaves out local taxes unless named above, the alternative minimum tax effect of note interest, and equipment recapture on a business sale. Federal tables for later years carry the 2026 tables forward.

Spreading a Kentucky sale over several years

On an installment sale the gain is reported as the buyer pays you (IRC 453), so each year's slice can stay in lower federal brackets and under the 3.8% threshold. Building depreciation is reported first (Treas. Reg. 1.453-12), equipment recapture is taxed in the year of sale (IRC 453(i)), and notes over $5,000,000 owe the Section 453A interest charge. More on how it works: what a structured installment sale is.

Sources

• Kentucky Revised Statutes 141.020
• IRS Rev. Proc. 2025-32: 2026 federal brackets.
• IRC 1(h) and IRC 1411: capital gain rates and the 3.8% tax (as in force October 2026).

Frequently asked

What is the capital gains tax rate in Kentucky for 2026?

Kentucky taxes capital gains as ordinary income at a flat 3.5% for 2026, down from 4.0% for 2025 (KRS 141.020(2), as amended by 2025 HB 1). Federal capital gains tax and the 3.8% net investment income tax come on top.

How much tax on a $2,000,000 sale in Kentucky?

In the example on this page, a single filer selling a business they work in for $2,000,000 with a $1,740,000 taxable gain owes $401,886 in 2026: $340,986 federal, $0 net investment income tax and $60,900 Kentucky tax. Spread over 10 years, the tax is $321,900.

Do nonresidents pay Kentucky tax when they sell property there?

Kentucky taxes a nonresident on gain from real estate and other property located in Kentucky, so selling Kentucky property from another state still means a Kentucky return.