Kentucky Estate Taxes
Kentucky has two types of death taxes: an inheritance tax and an estate tax. The Kentucky inheritance tax is imposed on a beneficiary's right to receive property from a deceased person. The amount of tax imposed depends on who gets what after you are gone, according to the following classes of beneficiaries:
- Class A: Any portion of the net taxable estate passing to a surviving spouse (including the entire value of any trust or life estate); an infant child by blood or adoption; a child by blood or a child adopted during infancy or adulthood (if raised by the decedent during infancy); a stepchild; a grandchild of any of the above; a parent; or a brother or sister (full- or half-blooded) is completely exempt from tax.
- Class B: Transfers to the decedents's nephew, niece, nephew or niece of the half-blood, son-in-law, daughter-in-law, aunt, and uncle are taxed (according to the table below) after the first $1,000 transferred to each such person.
- Class C: This category includes any person not included in Class A or Class B above. The first $500 transferred to a member of this class is exempt from tax. Any amount above that is taxed per the rates in the table below.
| Kentucky Inheritance Tax Rates |
| Value of Property Passing to Class |
Class B Tax on Col. (1) |
Class B Rate on Excess |
Class C Tax on Col. (1) |
Class C Rate on Excess |
| (1) |
(2) |
(3) |
(4) |
(5) |
(6) |
| $0 |
$500 |
$0 |
4% |
$0 |
6% |
| $500 |
$1,000 |
$0 |
4% |
$0 |
6% |
| $1,000 |
$5,000 |
$0 |
4% |
$30 |
6% |
| $5,000 |
$10,000 |
$160 |
4% |
$270 |
6% |
| $10,000 |
$20,000 |
$360 |
5% |
$570 |
8% |
| $20,000 |
$30,000 |
$860 |
6% |
$1,370 |
10% |
| $30,000 |
$40,000 |
$1,460 |
8% |
$2,370 |
12% |
| $40,000 |
$50,000 |
$2,660 |
10% |
$4,170 |
14% |
| $50,000 |
$60,000 |
$3,160 |
10% |
$4,870 |
14% |
| $60,000 |
$100,000 |
$4,160 |
12% |
$6,270 |
16% |
| $100,000 |
$200,000 |
$8,960 |
14% |
$12,670 |
16% |
| $200,000 |
$500,000 |
$22,960 |
16% |
$28,670 |
16% |
| $500,000 |
and above |
$70,960 |
16% |
$76,670 |
16% |
Kentucky also has an estate tax that is intended to absorb the maximum credit against the federal estate tax. If a federal estate tax return must be filed and Kentucky's portion of the credit for state death taxes exceeds the state inheritance tax, the difference between the credit and the inheritance tax must be paid to Kentucky as an estate tax.
Deductions. The following items can be deducted from a resident decedent's estate when calculating Kentucky estate tax liability:
- decedent's debts (except those secured by property not taxable in Kentucky and debts barred by the statute of limitations)
- taxes accrued prior to death (except those on property not taxable in Kentucky)
- federal estate taxes in proportion to the amount of the net estate in Kentucky
- special assessments due and unpaid which are a lien on the property
- funeral expenses (up to $5,000)
- commissions of executors and administrators (up to amounts actually allowed and paid)
- administration costs, including attorney's fees (up to amounts actually allowed and paid)
- mortgages
For estates involving a nonresident decedent, similar deductions apply except that deductions will probably be apportioned. A deduction will generally apply to the proportion that the property assessed in Kentucky bears to the total taxable property of the estate. An exception to this general rule applies to administration and funeral expenses, which are not apportioned.
Returns. If a federal estate tax return is not required to be filed, there is no need to file a Kentucky estate tax return. However, a Kentucky inheritance tax may still be due.
If any taxes are due, the return must be filed with the Kentucky Revenue Cabinet within 18 months of the decedent's death. Any taxes owed must be paid within the same 18-month period, otherwise interest will accrue on any unpaid balance. A five percent discount incentive is provided to entice estates to pay any taxes owed within the first nine months of death.
Generation-skipping transfer tax. Kentucky does not impose this type of tax.
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