Combined rate and how to defer it in Kentucky.
Kentucky's flat 4.00% income tax on capital gains keeps the combined rate for investment property at 27.8% (20% federal + 3.8% NIIT + 4.00% state), a relatively contained number compared to neighboring states.
Kentucky taxes capital gains as ordinary income at a flat 4.00% state rate, on top of federal. See the full estimate including depreciation recapture in the capital gains tax calculator.
A 1031 like-kind exchange can defer the combined 27.8% rate when you reinvest all proceeds into a replacement property. Model the exchange in the 1031 exchange calculator and map your deadlines with the timeline calculator.