Kentucky Tax on a 2026 Sale
Kentucky's individual income tax is a flat 3.5 percent of net income for tax years beginning in 2026, down from 4 percent for 2024 and 2025. There is no separate capital gains rate, so a gain on a Louisville rental is taxed at the same 3.5 percent. Under current law the rate stays at 3.5 percent for 2027 unless the General Assembly acts. Kentucky taxes nonresidents on income from property located in Kentucky, so living out of state does not take a Louisville sale out of Kentucky tax.
Kentucky begins with federal gross income and follows the Internal Revenue Code as of December 31, 2025, and its adjusted gross income statute lists no Section 1031 adjustment. Gain deferred on your federal return in a like-kind exchange generally carries through to Kentucky.
Sources: KRS 141.020 (Kentucky income tax rate); Kentucky Department of Revenue: 2026 withholding formula; KRS 141.010 (Kentucky IRC conformity); KRS 141.019 (Kentucky adjusted gross income)
Louisville Metro, Bullitt County and Recording Your Deed
Louisville Metro's occupational license ordinance defines a business as any activity conducted for gain or profit and measures net profit from federal gross income. The Louisville Metro Revenue Commission requires an occupational license net profit return, and Form OL-3EXT gives an automatic six month extension. Talk with your tax advisor about how your rental and your sale are reported on that return. In Shepherdsville, the city levies a 2 percent occupational tax on payroll.
Kentucky's transfer tax is $0.50 for each $500 of value, paid by the seller and collected by the county clerk before the deed is recorded. Deeds are recorded with the clerk of the county where the property sits, so a Louisville deed goes to the Jefferson County Clerk and a Shepherdsville deed to the Bullitt County Clerk.
Sources: Louisville Metro Code of Ordinances, section 110.01; Louisville Metro Government: occupational license return extension notice; City of Shepherdsville: occupational tax FAQ; KRS 142.050 (Kentucky real estate transfer tax); KRS 382.110 (where deeds are recorded)
How 1031 Federal Exchange Handles a Louisville Exchange
Your exchange starts before the sale closes, when we sign the exchange agreement with you. We hold your proceeds so you never receive them, track Day 45 and Day 180 with you, and wire funds to the replacement property closing, whether that property is in Jefferson County, Bullitt County or another state. Attorney Steve Wolterman leads every exchange.
Louisville, KY 1031 Exchange Questions
How much is Kentucky's transfer tax on a Louisville sale?
Kentucky charges $0.50 for each $500 of value declared in the deed, paid by the seller and collected by the Jefferson County Clerk before recording. On a $600,000 sale that is $600.
Did Kentucky's income tax rate change for 2026?
Yes. Kentucky's flat rate is 3.5 percent for tax years beginning in 2026, down from 4 percent for 2024 and 2025, and current law keeps 3.5 percent for 2027 unless the General Assembly changes it.
State tax facts on this page were checked against official Louisville, KY sources in November 2026. Tax rules change, and this page is general information, not tax advice for your situation. Confirm the details with your tax advisor before you sell.
Ready to plan a 1031 exchange on your Louisville investment property? Contact 1031 Federal Exchange today.