Property Management Taxes In Kentucky

Updated August 7, 2026

12 min read

This guide covers the taxes that actually apply to a property management company operating in Kentucky, and to the rental income it handles on behalf of owners. Every figure below is tied to the statute, agency rule, or published guidance that sets it, so you can confirm a rate or deadline before acting on it.

State Income Tax On Rental And Management Income

Kentucky imposes a single flat individual income tax rate on net income, with no brackets. The rate is 4.0% for tax year 2025 and 3.5% for tax year 2026 following 2025 RS HB 1. Rental income and property management fees are ordinary income taxed at that flat rate, and there is no special Kentucky rate for real estate activity. C corporations pay a separate 5% corporate income tax, and limited liability entities also owe the LLET.

Kentucky's individual income tax is a flat 4 percent for tax year 2025 and allows itemized deductions and certain income reducing deductions. Kentucky tax law is based on the Internal Revenue Code in effect as of December 31, 2024. (KRS 141.020)
2025 Regular Session HB 1 reduced the individual income tax rate from 4 percent to 3.5 percent for taxable years beginning on or after January 1, 2026. It was signed by the Governor on February 6, 2025 and enacted as 2025 Ky. Acts ch. 1. (2025 Ky. Acts ch. 1 (2025 RS HB 1), amending KRS 141.020)
The Kentucky corporation income tax is a flat 5 percent for tax years beginning on or after January 1, 2018. (KRS 141.040)
The Limited Liability Entity Tax applies to corporations and limited liability pass-through entities such as LLCs, S corporations, and limited partnerships, but not to sole proprietorships or general partnerships. The minimum LLET is $175, entities with total gross receipts or gross profits of $3 million or less pay only the $175 minimum, and above $6 million the tax is the lesser of 0.095 percent of Kentucky gross receipts or 0.75 percent of Kentucky gross profits. (KRS 141.0401)
Kentucky cities and counties may levy occupational license taxes on wages and on the net profits of businesses operating in the jurisdiction. These local taxes are separate from and in addition to the state income tax and are administered by the local jurisdiction, not by the Department of Revenue. (KRS 68.180; KRS 91.200; KRS 92.281)

Sales Tax On Rent: What Applies And What Does Not

Kentucky does not impose sales tax on long-term residential rent. The 6 percent sales tax reaches the rental of rooms, lodgings, campsites, and accommodations, but KRS 139.200(2)(a) expressly excludes accommodations supplied for a continuous period of 30 days or more. Kentucky's expanded list of taxable services does not include residential leasing or property management. Short-term accommodations also carry a 1 percent statewide transient room tax plus local transient room taxes.

Kentucky imposes a 6 percent sales tax on the rental of rooms, lodgings, campsites, or accommodations furnished by hotels, motels, inns, tourist camps, campgrounds, recreational vehicle parks, or any other place regularly furnishing accommodations to transients. The statute states: the tax shall not apply to rooms, lodgings, campsites, or accommodations supplied for a continuous period of thirty (30) days or more to a person. (KRS 139.200(2)(a))
Kentucky's enumerated taxable services under KRS 139.200(2) do not include residential leasing, long-term rent, or property management services. The closest item is the rental of space for meetings, conventions, short-term business uses, entertainment events, weddings, banquets, parties, and other short-term social events, which does not reach residential tenancies. (KRS 139.200(2)(ai))
In addition to the 6 percent sales tax, short-term accommodations are subject to a 1 percent statewide transient room tax and to local transient room taxes. Stays of 30 or more consecutive days are excluded from the transient room taxes, including the first 29 days of a longer continuous stay. (KRS 142.400; KRS 91A.390)
Persons providing or facilitating accommodations, including short-term rental platforms and online travel companies, must collect the tax on the total rental charge, including separately stated pet, cleaning, damage, and cancellation fees. A host who rents exclusively through a platform that collects and remits does not need to register separately, but a host taking direct bookings must register. (KRS 142.400; KRS 139.200)

Property Tax

Kentucky property is assessed at 100 percent fair cash value as of January 1 each year by the county property valuation administrator. The total bill is the sum of the state rate plus county, city, school district, and special district rates, all expressed in cents per $100 of assessed value. The state real property rate is 10.6 cents per $100 for 2025. Business tangible personal property is separately assessed and reported.

The 2025 state real property tax rate is 10.6 cents per $100 of assessed value, reduced from 10.9 cents for 2024 because the statutory formula caps growth in state real property receipts at 4 percent over the prior year. (KRS 132.020)
The state real property tax rate is set annually by July 1 and has declined from 31.5 cents per $100 of assessed valuation to its current level under the statutory recapture provision. (KRS 132.020)
The Kentucky assessment date is January 1 of each year. The real property listing period is January 1 through March 1, the public inspection period is 13 days beginning the first Monday in May, and an appeal to the local board of assessment appeals must be filed by one workday after the inspection period ends. (KRS 132.220; KRS 133.045; KRS 133.120)
The homestead exemption for the 2025 and 2026 assessment years is $49,100, up from $46,350 for 2023 and 2024. It is available to owner occupants who are at least 65 during the tax period or who are classified as totally disabled by a public or private retirement system, and it is adjusted every two years. (Ky. Const. sec. 170; KRS 132.810)
Kentucky property is assessed at 100 percent fair cash value, the price it would bring at a fair voluntary sale. Local rates are published every year in the Department of Revenue Property Tax Rate Book, which lists each county, city, school district, and special district rate. (Ky. Const. sec. 172; KRS 132.190)

Withholding And Employer Taxes

Property management companies with employees must register for Kentucky employer withholding and withhold Kentucky income tax from both resident and nonresident employees. The withholding rate tracks the flat individual rate and is 3.5 percent for 2026. All filing frequencies must file and pay electronically. Many Kentucky cities and counties also require withholding of local occupational license fees on wages.

The Kentucky withholding tax rate is 3.5 percent for tax year 2026. KRS Chapter 141 requires employers to withhold Kentucky income tax for both resident and nonresident employees on wages as defined in IRC Section 3401(a). (KRS 141.310; 103 KAR 18:150)
For 2026, all employer filing frequencies are required to file and pay withholding electronically through the MyTaxes portal. (103 KAR 18:150)
Withholding statements, meaning Forms W-2, W-2G, and the 1099 series, must be reported to the Kentucky Department of Revenue on or before January 31. Employers and payers issuing 25 or fewer withholding statements may file Form K-5 online. (KRS 141.335)
Kentucky cities and counties may impose occupational license fees on wages that employers must withhold and remit locally, separately from state withholding. These are administered by the local jurisdiction. (KRS 68.180; KRS 91.200)

Federal Obligations

Federal rules govern most of a Kentucky property manager's reporting burden. Rental income and expenses are reported on Schedule E, or Schedule C when substantial services are provided. Residential rental buildings are depreciated over 27.5 years for federal purposes, though Kentucky requires an adjustment. The information return threshold rose from $600 to $2,000 for payments made after December 31, 2025.

The One, Big, Beautiful Bill Act raised the IRC Section 6041(a) information return reporting threshold from $600 to $2,000 for payments made after December 31, 2025, with an annual inflation adjustment for payments made after December 31, 2026. Rents of $2,000 or more are reported in Box 1 of Form 1099-MISC. (IRC sec. 6041(a) and sec. 6041(h), as amended by Pub. L. 119-21 sec. 70433)
For tax year 2025 the IRS made no changes to Forms W-2, existing Forms 1099, or payroll return forms, so 2025 payments remain reportable under the prior threshold. Updated forms and guidance apply for tax year 2026. (IRS Publication 1099 (2026), General Instructions for Certain Information Returns)
Rental real estate income and expenses are reported on Schedule E (Form 1040), or on Schedule C if substantial services primarily for the tenant's convenience are provided. Advance rent is income in the year received, tenant paid expenses are rental income, and security deposits are not income if they must be returned, but become income when retained for damages or lease violations. (IRS Topic No. 414; IRS Publication 527)
Residential rental property is depreciated over 27.5 years under the federal modified accelerated cost recovery system. Kentucky does not conform, and requires a separate Kentucky computation where federal bonus depreciation or Section 179 above the Kentucky cap was claimed. (IRC sec. 168; KRS 141.0101)

Filing Deadlines

Kentucky individual returns follow the federal calendar and are due April 15. Business tangible personal property returns are due between January 1 and May 15 with no extensions. Withholding statements are due January 31. Property tax bills follow a fixed collection cycle running from a 2 percent discount period through escalating penalties and eventual transfer to the county clerk on April 15.

Business tangible personal property returns on Form 62A500 must be filed between January 1 and May 15 each year. Extensions are not allowed for property taxes. The personal property listing period is January 1 through May 15. (KRS 132.220)
The property tax collection cycle runs as follows: bills delivered to the sheriff by September 15, payable with a 2 percent discount from September 15 through November 1, payable at face value November 2 through December 31, subject to a 5 percent penalty January 1 through January 31, and subject to a 10 percent penalty plus a 10 percent sheriff's add on fee after January 31. Unpaid bills transfer to the county clerk at close of business April 15. (KRS 134.015)
Withholding statements, Forms W-2, W-2G, and the 1099 series, are due to the Kentucky Department of Revenue on or before January 31. (KRS 141.335)
Kentucky individual income tax returns are due on the fifteenth day of the fourth month following the close of the tax year, which is April 15 for calendar year filers, matching the federal due date. (KRS 141.160)

Registration And Recordkeeping

A Kentucky property management firm needs a real estate brokerage license from the Kentucky Real Estate Commission, a Department of Revenue tax account for withholding and any sales tax obligations, and usually one or more local occupational license accounts. Tangible personal property must be reported county by county. Kentucky's real estate rules also impose separate property management account and recordkeeping duties on brokers.

Real estate brokerage under KRS 324.010 includes engaging in property management, defined as the overall management of real property for others for a fee, which may include marketing, leasing, collecting rental payments, paying notes and mortgages, coordinating maintenance, and remitting funds and accounting statements to the owner. (KRS 324.010)
A separate tangible personal property return must be filed for each location within Kentucky, and property must be reported in the county where it is located. Timely returns go to the property valuation administrator in that county. Out-of-state companies must also report Kentucky located property. (KRS 132.220)
Household goods and personal effects in the taxpayer's home are exempt from tangible personal property tax, but property used for business purposes is taxable even if the business is operated from a home. (Ky. Const. sec. 170; KRS 132.220)
Employers must register a Kentucky withholding account and, for 2026, file and pay electronically through the MyTaxes portal. (103 KAR 18:150)

Recent Changes Worth Tracking

2025 RS HB 1, signed February 6, 2025 as 2025 Ky. Acts ch. 1, lowered the individual income tax rate to 3.5 percent for taxable years beginning on or after January 1, 2026. (2025 Ky. Acts ch. 1, amending KRS 141.020)
The Kentucky withholding rate follows the individual rate and is 3.5 percent for tax year 2026. The 2026 standard deduction is $3,360. (KRS 141.081; KRS 141.310)
Effective January 1, 2023, HB 8 amended KRS 142.400 to extend the 1 percent statewide transient room tax to campgrounds and RV parks and to require accommodations facilitators to collect the tax, while exempting receipts from a continuous stay of 30 days or more. (KRS 142.400, as amended by 2022 RS HB 8)
The 2025 state real property tax rate fell to 10.6 cents per $100 of assessed value from 10.9 cents for 2024. (KRS 132.020)

Tax is one half of Kentucky compliance. See our guide to Kentucky property management laws and regulations for licensing, trust account, and disclosure rules.

Keeping This Straight

Tax rates and thresholds move more often than most operators expect, and the figures circulating in older articles go stale quickly. Check any rate against its citation before you quote it to an owner, and re-check them at the start of each tax year.

This guide is a starting point for professional managers, not tax or legal advice. For a specific filing, work with a CPA familiar with Kentucky rental property, and confirm current figures with the Kentucky Department of Revenue or the IRS.