Kentucky Paycheck Calculator

Kentucky Paycheck Calculator

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Kentucky Paycheck Quick Facts Kentucky income tax rate: 5% Median household income: $46,535 (U.S. Census Bureau) Number of cities and counties that have local income taxes: 220

How Your Kentucky Paycheck Works

Whenever you get paid, regardless of which state you call home, your employer will withhold federal income and FICA taxes from your paycheck. Federal income taxes will go to the IRS, where it counts toward your annual income taxes. FICA taxes are comprised of Medicare and Social Security taxes. Each month, you pay into these systems so you can reap the benefits during retirement. Medicare tax is 1.45% of your wages and Social Security is 6.2%. If your salary is over $200,000, your earnings in excess of $200,000 are subject to an additional 0.9% in Medicare tax.

How much you pay in federal income taxes depends on the information that you filled out on your W-4 form. This is the form that tells your employer how much to withhold in taxes, therefore you need to fill out a new one whenever you start a new job or if you need to make any changes during the year. Situations requiring a new W-4 include getting married or having a child.

Because of the new tax plan passed in December 2017, the calculations for tax withholding changed slightly in early 2018. You should have already seen the changes to your paycheck and you’re not required to do anything. However, it is a good idea to recheck your W-4 at the start of the new year just to make sure the information is still correct.

One factor that will affect the amount of taxes withheld from your pay is your marital status. Regardless of how you file your taxes (e.g. single vs. head of household), it will affect how much you owe in taxes and how many withholding allowances you qualify for. Having dependents also affects your allowances.

As a general rule, the more allowances you claim on your W-4 form, the less money is taken out in taxes and the bigger your paychecks are. But you want to exercise caution here. If you claim more allowances that you’re supposed to, you will end up underpaying your taxes all year and you will have a big tax bill during tax season. You could even face underpayment penalties.

Almost everyone has to pay federal income and FICA taxes, but there are other monies that you may opt to have taken out of your paycheck. If you have health or life insurance policies through your employer, those premiums are deducted from your wages. Similarly, if you contribute to company-sponsored retirement plans like a 401(k) or Roth IRA, that money is subtracted from your paycheck. The same goes for any money you choose to put in a health savings account (HSA), flexible spending account (FSA) or commuter benefit program.

As of 2018, Kentuckians are taxed at flat rate of 5%. The state previously had progressive tax rates (ranging from 2% up to 6%) but changed to a flat rate during a tax reform in early 2018.

You also be have to pay local income taxes, which Kentucky calls occupational taxes. Not only will you be charged county taxes, but if you live in a city that also charge local taxes, you’ll be taxed for both. Most counties and cities charge a percentage, ranging from 0.05% to 3.00%. These taxes are levied on your wages, not your taxable income.

How You Can Affect Your Kentucky Paycheck

If you want a bigger paycheck, you can start by asking your employer for a raise. You can also ask to work additional shifts if you are eligible for overtime pay.

Modifying your pre-tax contributions can also help your bottom line. While your paychecks are smaller if you go this route, you’re actually sheltering more of your income from the tax man. Some pre-tax accounts you should consider are a 401(k) or 403(b), if your employer offers one. If your employer matches your contributions to a 401(k), you should make sure that you contribute enough to take full advantage of the match. You can get similar tax benefits from a traditional IRA if your employer doesn’t offer a 401(k). You can also make pre-tax contributions into a health savings account (HSA) or flexible spending account (FSA).

If you have to pay a big tax bill every year, you should check your W-4 form to make sure that you aren’t claiming the wrong number of allowances. If you’re claiming too many, this could lead your employer to withhold too little in taxes throughout the year. Then you’ll have to make up that balance in April. You can fill out a new W-4 if you want to claim fewer allowances. You can also elect to have a dollar amount taken out of each of your paychecks if you anticipate having to a pay a lot of taxes. Decide what you want that amount to be - say $50 a paycheck, and write that on the correct line of the W-4. It might seem odd to choose to get smaller paychecks, but remember: You will owe those taxes anyway. You’re simply spreading it out and paying it throughout the year, instead of facing a lump sum in April.

If learning the ins and outs of Kentucky’s tax structure has you wanting to become a resident, take a look at our Kentucky mortgage guide to learn about buying a home in the state. This guide contains everything you need to know about mortgages in Kentucky, whether it be for a new home or refinancing your current one.