Capital Gains Tax in Kentucky

Kentucky runs a single flat rate on income, gains included, so a real estate investor doesn't have to guess which bracket applies. Add federal and NIIT to that 4.00% state rate and a property sale lands at a combined 27.8% (20% federal + 3.8% NIIT + 4.00% state).

Kentucky's capital gains rate, broken down

Three pieces make up that 27.8%, and Kentucky only controls one of them. Run a specific sale through the capital gains tax calculator to see how depreciation recapture changes the total; here's what builds the headline number.

• Federal long-term capital gains: 20%, the top bracket most investment property sales land in
• Net investment income tax: 3.8%, added once income clears the federal threshold
• Kentucky state income tax: 4.00% flat, unchanged whether the gain is five figures or seven

Where the 1031 exchange fits

That 27.8% isn't due the moment a property leaves your hands, provided it goes into another one. A 1031 exchange defers the whole bill by moving sale proceeds into a replacement property instead of a bank account. Work through the swap in the 1031 exchange calculator, then lock in your 45- and 180-day windows using the timeline calculator, since missing either one ends the deferral.

Things to know before you exchange

• Kentucky does not run a separate 1031 program; the deferral above comes entirely from federal Section 1031.
• A qualified intermediary has to hold your proceeds before a Kentucky sale can qualify.