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Governor Andy Beshear signs House Bill 1, lowering individual income taxes in 2026

FILE - Exterior photo of the Kentucky State Capitol in Frankfort, Ky., Wednesday, April 7, 2021. Republican-backed measures to relax child labor rules and bolster food stamp eligibility standards won passage Thursday, Feb. 22, 2024, in the Kentucky House over impassioned objections from Democrats. (AP Photo/Timothy D. Easley, File)
Timothy D. Easley/AP
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FR43398 AP
FILE - (AP Photo/Timothy D. Easley, File)

On February 6, Governor Andy Beshear announced the signing of House Bill 1. It lowers Kentucky’s individual state income tax from 4 percent to 3.5 percent. The bill will take effect at the start of next year. Beshear said this move will put more money in the pockets of Kentuckians as prices continue to go up.

“This is a bill that’s been supported by republicans. It’s been supported by democrats. In the end, I support it because it’s going to help you, and that’s where the analysis should always focus,” said Beshear.

According to Legislative Research Commission staff this tax break will reduce the money coming into state coffers by $718 million annually. Beshear said he believes the growth Kentucky is seeing in certain areas will allow the state to manage that loss.

“I signed the bill this morning because our economy is booming. We’ve broken every record from private sector investment to new jobs, to three-year average for wages, to exports, and to tourism; but I know right now, things cost too much for our families,” said Beshear.

House Bill 8 was passed in 2022, lowering the individual income tax rate to 4 percent and allowing a further rate reduction in the following years given certain financial conditions were met. One condition which was met was a balance in the Budget Reserve Trust Fund equal to at least 10 percent of state general fund revenue. The other condition required general fund revenues which exceeded appropriations and the cost of a one percent reduction to state income tax.

Beshear also announced the launch of a new webpage which will contain information regarding the costs of proposed legislation. The page, titled 2025 Facts and Fiscal notes will show the expected costs of each new bill proposed during the legislative session.