How to File Your Kentucky Tax Return for 2023: Step-by-Step Guide for Individuals and Small Businesses

Filing a Kentucky tax return for 2023 is essential for individuals and small business owners. Whether you’re self-employed, earn wages from an employer, or operate a small business, understanding how to file correctly ensures compliance with state tax laws and helps avoid costly mistakes or delays.

This step-by-step guide explains how to file taxes accurately, from choosing the correct forms and filing status to submitting your return and checking your refund status. You’ll also learn about payment options, deductions, and how to track your refund using your Social Security number and exact refund amount.

Whether you plan to use tax filing software or file a paper return by mail, this guide covers everything you need to know. It also explains how to get your refund faster through direct deposit, pay if you owe money, and ensure your return is complete before the April 15, 2024, deadline.

Overview of Kentucky State Income Tax for 2023

Kentucky requires most individuals and small business owners to file a state income tax return if their income meets certain thresholds. These requirements are based on your filing status, modified gross revenue, Kentucky adjusted gross income, and family size. Even if you do not owe taxes, filing may still be necessary to receive a refund for any state income tax your employer withheld.

Who Needs to File a Kentucky Tax Return

Kentucky uses a two-part system to determine if you must file. First, check your family size against Chart A to see if your modified gross income exceeds the minimum:

• Family size of one: $15,060
  
  
• Family size of two: $20,440
  
  
• Family size of three: $25,820
  
  
• Family size of four or more: $31,200

If your income exceeds the amount for your family size, you must also check Chart B. This chart sets the minimum Kentucky adjusted gross income required to file:

• Single under age 65: $3,160
  
  
• Single age 65 or older, or blind: $4,160
  
  
• Single, age 65, and blind: $5,160
  
  
• Married (both under 65): $3,160
  
  
• Married (one 65 or older): $4,160
  
  
• Married (both 65 or older): $5,160

You must file a tax return if both thresholds are met. Additionally, anyone with Kentucky income tax withheld from their paycheck should file, even if their income falls below these limits, to receive a refund.

Key Changes to Know for the 2023 Tax Year

Several updates apply to your 2023 Kentucky tax return:

• Standard deduction increased to $2,980.
  
  
• The Family Size Tax Credit is available for qualifying households up to 133% of the federal poverty level.
  
  
• Kentucky now conforms to the federal Internal Revenue Code as of December 31, 2022.
  
  
• A new refundable Pass-Through Entity Tax Credit is available for eligible taxpayers.
  
  
• Military pay remains fully exempt from Kentucky income tax.

Filing Deadline

Your Kentucky tax return must be filed electronically or postmarked by April 15, 2024. Failing to file by the due date may result in a 2% penalty of the total tax due for each 30 days (or part thereof) the return is late. If you expect a refund, filing late will delay your refund but will not result in a penalty.

What Tax Forms and Schedules to Use

Filing your Kentucky tax return accurately starts with selecting the correct forms and supporting schedules. These vary depending on your residency, income type, and tax situations, such as deductions or credits. Using the wrong form or omitting necessary schedules can delay processing or affect your refund.

Main Tax Forms

• Full-year Kentucky residents use Form 740. This is the standard form for individuals and small business owners who lived in Kentucky for all of 2023 and had income that meets the state’s filing requirements.
  
  
• Form 740-NP is intended for nonresidents or part-year residents. You should use this form if you earned income from Kentucky sources while living elsewhere or moved into or out of Kentucky during the tax year.
  
  
• Form 740-NP-R is a simplified return for residents of reciprocal states. If you lived in Illinois, Indiana, Michigan, Ohio, Virginia, West Virginia, or Wisconsin and only had Kentucky income tax withheld—with no other Kentucky-sourced income—this form allows you to request a refund of the tax paid.

Common Schedules and Attachments

• Schedule M must be completed if you need to adjust your federal adjusted gross income for Kentucky purposes. This includes adding or subtracting out-of-state bond interest, military pay, or exempt retirement income.
  
  
• Schedule A should be used if you itemize deductions instead of claiming the standard deduction, Schedule A should be used. Remember that Kentucky does not allow all federal deductions, so only eligible expenses should be listed.
  
  
• Schedule ITC is required to claim credits such as the Family Size Tax Credit or other individual tax credits for those 65 or older, blind, or members of the National Guard.
  
  
• Form 8863-K is necessary to claim the Kentucky education tuition tax credit for qualified expenses.
  
  
• Schedule P must be included if you exclude up to $31,110 in pension income from your Kentucky taxable income.

Attach all applicable schedules and supporting documents to avoid delays and ensure your return is processed completely.

Step-by-Step Instructions to File Your Return

Filing your Kentucky tax return involves a series of essential steps. Completing each stage carefully helps reduce errors and improves the likelihood of receiving your refund without unnecessary delays.

Step 1: Gather Required Documents

Before you begin preparing your return, make sure you have the following items on hand:

• Form W-2 from each employer you worked for in 2023.
  
  
• Any 1099 forms you received, including 1099-INT for interest, 1099-DIV for dividends, 1099-G for unemployment, and 1099-R for retirement distributions.
  
  
• A completed copy of your federal tax return. Your Kentucky return is based in part on your federal adjusted gross income.
  
  
• A copy of last year’s Kentucky tax return, if available, for reference.
  
  
• Your bank account and routing number are needed to receive your refund through direct deposit or make payments electronically.
  
  
• Social Security numbers for yourself, your spouse (if applicable), and any dependents claimed on your return.
  
  
• Receipts, mileage logs, and other records to support deductions or tax credits you plan to claim.

Step 2: Determine Your Filing Status

Your filing status affects your deductions, tax brackets, and credit eligibility. Kentucky recognizes the following filing statuses:

1. Single—This applies if you were unmarried, legally separated, or divorced on the last day of the year.
   
   
2. Married Filing Joint Return—You and your spouse report combined income and deductions on one return.
   
   
3. Married Filing Separate Returns—You and your spouse file two separate returns and report only your income and deductions.
   
   
4. Married Filing Separately on a Combined Return—This option allows married couples to use one return form while keeping income and deductions separate. It is often used when it results in a lower combined tax liability.

Married taxpayers should compare the tax impact of options 2 and 4 to determine which filing status leads to a lower total amount owed.

Step 3: Complete the Basic Information Section

Enter your name, address, and Social Security number as shown on your Social Security card. If filing jointly, include your spouse’s information as well. Check the appropriate boxes for your filing status, and mark whether you are filing an amended return. Ensure this section is complete and matches the information used on your federal return.

Step 4: Report Income

On Line 5 of Form 740, report your federal adjusted gross income (AGI) from your federal return. This is the foundation for calculating your Kentucky tax liability.

Then, use Schedule M to apply any necessary Kentucky-specific adjustments.

Common additions include:

• Interest earned from municipal bonds issued by other states is not exempt in Kentucky.
  
  
• Certain deductions are allowed at the federal level, but not in Kentucky.

Common subtractions include:

• Active duty military pay is fully exempt from Kentucky tax.
  
  
• Interest from U.S. government bonds and obligations.
  
  
• Railroad retirement benefits.
  
  
• Social Security income was entirely excluded.
  
  
• Up to $31,110 in qualified pension income per taxpayer.

Step 5: Claim Deductions

You may either claim the standard deduction of $2,980 or itemize deductions using Schedule A. Most taxpayers use the standard deduction, but itemizing may be beneficial if your qualified expenses exceed that amount.

Remember that Kentucky does not allow several federal deductions, such as:

• State and local income taxes.
  
  
• Personal property taxes on vehicles or equipment.
  
  
• Real estate taxes on your home or land.
  
  
• Medical expenses that are deductible federally.

Step 6: Calculate Your Tax

To determine your tax liability, multiply your Kentucky taxable income by 4.5% (0.045). Kentucky uses a flat tax rate, so this calculation is straightforward for most taxpayers.

Step 7: Apply Credits

Use Schedule ITC and Form 8863-K to claim credits you qualify for:

• The Family Size Tax Credit is based on income and household size and reduces the amount you owe.
  
  
• The Education Tuition Tax Credit helps offset qualifying postsecondary education expenses.
  
  
• Additional credits are available for individuals 65 or older, blind, or members of the National Guard.
  
  
• A Child and Dependent Care Credit is also available, equaling 20% of the federal credit.

Step 8: Determine Refund or Balance Due

Subtract your credits and any Kentucky income tax already withheld from your total tax. If your payments exceed your tax liability, you are due a refund. You will owe the difference if your tax is higher than your payments.

Step 9: Avoid Common Filing Mistakes

Before submitting your return, double-check for the following issues:

• Confirm that you used your federal AGI, not federal taxable income, on Line 5.
  
  
• Make sure Schedule M is completed if adjustments are needed.
  
  
• Do not include Social Security income as taxable—Kentucky excludes it entirely.
  
  
• Avoid claiming ineligible deductions from your federal return.
  
  
• Check all math calculations and totals for accuracy.
  
  
• Ensure all required parties sign your return.
  
  
• Verify that the correct filing status is selected.

Errors may delay your refund or result in penalties if you owe additional tax.

How to File Your Kentucky Tax Return

Kentucky offers several ways to file your state income tax return. Choosing the right option can make the process faster and more convenient.

Electronic Filing Options

• You can file directly through KY File, the state’s free online system for current-year returns. It performs basic math checks and is suitable for simple tax situations.
  
  
• If your income is $69,000 or less, you may qualify to use Free File Software from approved providers. This software often guides you through the process and helps minimize errors.
  
  
• Many taxpayers use paid tax preparation software or professional tax preparers for added convenience, built-in checks, and personalized guidance. This may help you avoid costly mistakes and increase your chances of receiving the maximum refund.

Paper Filing Options

If you prefer to mail your return, be sure to send it to the correct address:

• If you owe tax:
  Kentucky Department of Revenue,
  Frankfort, KY 40619-0008
  
  
• If you expect a refund or have no balance due:
  Kentucky Department of Revenue
  Frankfort, KY 40618-0006
  
  
• For reciprocal state filers using Form 740-NP-R:
  Frankfort, KY 40620-0012

Always sign your return and include all supporting forms and schedules. Allow up to 10–14 weeks for processing paper returns.

How to Pay Your Kentucky Income Tax

The state offers several secure ways to pay if you owe taxes after completing your Kentucky tax return. Choosing the correct method can help you avoid late payment penalties and ensure your account is up-to-date.

Electronic Payment Options

• You can use the Kentucky Electronic Payment Portal at epayment.ky.gov to make payments directly from your bank account or with a credit card. This is the fastest and most reliable method.
  
  
• ACH payments (bank-to-bank transfers) are free when using the e-payment system. However, to avoid processing errors, ensure you correctly enter your account and routing numbers.
  
  
• Credit card payments are also accepted through the same portal, although service provider fees may apply. These payments are convenient if you need more flexibility but want to avoid missing the due date.

Paying Estimated Taxes

If you are self-employed or expect to owe more than $500 in taxes, you may need to make estimated tax payments quarterly. These can also be scheduled through the online system. Visit the Estimated Individual Income Tax Payments page for due dates and instructions.

Estimated payments help you avoid penalties and spread your tax obligations throughout the year.

Mailing a Check or Money Order

You may also choose to mail your payment. If you do:

• Make your check or money order payable to "KY State Treasurer."
  
  
• Write "KY Income Tax—2023," your Social Security number, and the tax year on the memo line.
  
  
• Mail your payment and return it to the appropriate address in the previous section.

Be sure your payment is postmarked by April 15, 2024, to avoid penalties.

Late Payment Penalties

Kentucky charges a minimum $10 penalty for underpayment if less than 75% of your total tax was paid by the filing deadline. Interest will also accrue on unpaid balances, so paying on time is essential—even if you request an extension to file.

How to Track Your Kentucky Tax Refund

If you expect a refund after filing your Kentucky tax return, you can check its progress online through the state's secure system.

Where’s My Refund?

Visit refund.ky.gov to access the “Where’s My Refund?” tool. This service is available 24/7 and allows you to track the status of your refund using the following details:

• Your Social Security number
  
  
• The exact whole-dollar amount of your expected refund

Be sure to enter the same information used on your tax return. The system updates nightly and reflects the most current status of your refund.

Refund Processing Times

According to the Kentucky Department of Revenue, typical processing times are

• E-filed returns: 4 to 6 weeks from the date the return is accepted
  
  
• Paper returns: 10 to 14 weeks due to manual processing.
  
  
• Amended returns: 20 to 24 weeks

Refunds are processed faster when you request a direct deposit from a financial institution. Make sure your account and routing numbers are accurate to avoid delays.

Contacting the Department

If you have waited longer than the typical time frame or your status has not changed, call the Department of Revenue at (502) 564-4581. Be prepared to provide your name, Social Security number, and the date your return was filed.

Final Filing Checklist

Before submitting your Kentucky tax return, review this checklist to ensure your return is accurate, complete, and ready for processing. Following these steps helps prevent delays, errors, or refund issues.

• Confirm that your return is complete and all required lines and fields are filled in correctly.
  
  
• Ensure you have attached all necessary forms and schedules, such as Form 740, Schedule M, or any other required attachments.
  
  
• Verify that all W-2s, 1099s, and other income documentation are included with your return.
  
  
• Check that your Social Security number, and your spouse’s if filing jointly, is entered exactly as shown on your Social Security card.
  
  
• Review your filing status to ensure it is appropriate for your situation and is marked clearly on the return.
  
  
• If you request a refund by direct deposit, confirm that your bank account and routing numbers are accurate and written.
  
  
• Sign your return where required, and make sure both spouses sign if filing a joint return.
  
  
• If you owe taxes, select a payment method or attach a check, making sure the payment information is correct.
  
  
• Use the appropriate mailing address for your paper return based on whether you expect a refund or have a balance due.
  
  
• Keep a copy of your complete return and all supporting documents for your records.
  
  
• Include any extension paperwork, such as Form 740EXT, if you previously filed for a filing extension.
  
  
• Double-check all math calculations and credit totals to catch any potential mistakes before filing.

Reviewing each item on this list before filing can reduce common filing errors and increase your chances of receiving your refund without delay.

Frequently Asked Questions

What should I do if I missed the April 15 deadline to file my Kentucky tax return?

If you missed the due date to file your Kentucky tax return, file as soon as possible to limit penalties and interest. You may owe late filing and late payment penalties, even if you plan to mail a paper return. If you’re due a refund, there’s no penalty, but your refund won’t be processed until your return is filed and marked complete by the Department of Revenue.

How can I check my Kentucky refund status after I file?

Use the “Where’s My Refund?” tool at refund.ky.gov to check your refund status. You’ll need your Social Security number and the exact refund amount from your tax return. This system shows the status of your return, including whether it's still being processed or the refund has been approved or issued. You can also contact the Department of Revenue if needed.

Can I file my Kentucky return using free tax software?

If your income falls within eligibility limits, you can file taxes using free tax software through Kentucky’s Free File program. This option allows you to complete and file your tax return electronically using approved tax filing software, which helps avoid mistakes and speeds up processing. Use only approved software listed on the Kentucky Department of Revenue website for your taxes.

How will I receive my Kentucky refund—check or direct deposit?

When you file your Kentucky tax return, you can receive your refund by paper check or direct deposit. Direct deposit is faster and more secure. You must enter your bank account and financial institution details to authorize the transfer. Paper checks take longer to arrive and may add additional mailing time to processing your refund.

What deductions or credits do Kentucky taxpayers often miss?

Commonly missed deductions and credits include the Family Size Tax Credit, pension income exclusions, and exemptions for active-duty military pay. Some taxpayers also overlook subtracting Social Security benefits and interest from U.S. obligations. Review all eligibility rules and complete the correct forms and schedules. Filing with the help of tax software or a professional may prevent errors and maximize your refund.

Can I file jointly if my spouse and I moved to Kentucky during 2023?

Yes, but your filing status and forms depend on your residency during the year. If you both became Kentucky residents in 2023, you may still be eligible to file jointly using Form 740 or Form 740-NP as part-year residents. Complete all required schedules and contact the Department of Revenue if your return involves income earned in multiple states last year.

What if I received income from another state in addition to Kentucky?

Kentucky residents must file a tax return that includes all income, even if earned in another state. You may qualify for a credit for taxes paid to the other state. Use the appropriate schedule to calculate this credit. Nonresidents with Kentucky income must file Form 740-NP. Always include the necessary forms, keep records from each employer, and consult the IRS or Kentucky DOR if your status is unclear.