Kentucky's individual income tax rate has been reduced from 4% to 3.5% effective January 1, 2026. Lawmakers state this change aims to return money to workers and boost economic strength, allowing residents to keep more of their earnings. For a household with the state's median income, this could mean annual savings of approximately $323. This tax cut is part of a larger Republican initiative to eventually eliminate the state income tax, though Governor Beshear has expressed concerns about long-term state finances.