Kentucky Announces a $3,470 Standard Deduction for 2027
Kentucky indexes its standard deduction for inflation each year. The 2027 increase is about 3.3%, with the state income tax rate remaining at 3.50% under current law.
Kentucky's standard deduction will rise to $3,470 for the 2027 tax year, up $110 from $3,360 in 2026. The Kentucky Department of Revenue (DOR) announced the inflation adjustment September 11. The increase follows the state's annual indexing formula, which ties the deduction to changes in consumer prices.
Kentucky's enacted income tax rate remains 3.50% for 2027 under current law. When income and the deduction rise at the same pace, that unchanged rate produces a larger dollar tax bill but keeps tax at the same share of income.
If Income Rises Along With the Deduction
The table below compares 2026 and 2027 for a single filer whose household income rises from $75,000 to $77,455.36, matching the deduction's approximately 3.27% increase. This illustration uses the unrounded percentage, not a projected pay raise.
The example assumes no income adjustments, so household income equals Kentucky adjusted gross income before the standard deduction. It excludes other deductions and tax credits. The Difference column shows the change from 2026 to 2027.
| Calculation | 2026 | 2027 | Difference |
|---|---|---|---|
| Household income | $75,000.00 | $77,455.36 | +$2,455.36 |
| Standard deduction | $3,360.00 | $3,470.00 | +$110.00 |
| Taxable income | $71,640.00 | $73,985.36 | +$2,345.36 |
| Income tax at 3.50%, before credits | $2,507.40 | $2,589.49 | +$82.09 |
| Effective tax rate | 3.343% | 3.343% | 0.000% |
The dollar tax bill rises $82.09, but the effective tax rate remains unchanged. Effective tax rate is state income tax divided by household income. Dollar amounts are rounded to cents and effective rates to three decimal places.
For context, U.S. Bureau of Labor Statistics data show average weekly wages rose 2.9% in Kentucky and 3.9% nationally from the first quarter of 2025 to the first quarter of 2026. Those averages describe recent wage growth, not a forecast for 2027 or a raise received by every worker.
How the Increase Compares With Inflation
Kentucky law ties the deduction to the Consumer Price Index for All Urban Consumers (CPI-U), using the national all-items index before seasonal adjustment. For 2027, the formula compares average monthly indexes for August 2025 through July 2026 with the preceding 12 months.
The announced deduction rises about 3.3%, close to the 3.4% national CPI-U increase over the year ending August 2026. That is a useful comparison, but the periods differ. The August figure is not the factor used in Kentucky's formula.
What If Your Income Stays the Same?
If household income stays at $75,000, the larger deduction reduces this single filer's calculated state income tax from $2,507.40 to $2,503.55. That is a $3.85 reduction in state income tax before credits.
Use the Deduction for the Right Tax Year
The $3,470 deduction applies to 2027 income, generally reported on returns filed in 2028. Taxpayers filing their 2026 return in 2027 will use the $3,360 deduction for that year.
Our Kentucky income tax rates and calculator page provides current-year calculations and deduction details. Visit our Kentucky income tax forms page for available returns and instructions.
References:
- Kentucky DOR Announces 2027 Standard Deduction. September 11, 2026. Kentucky Department of Revenue. Retrieved October 7, 2026.
- Kentucky DOR Announces 2026 Standard Deduction. Kentucky Department of Revenue. Retrieved October 7, 2026.
- KRS 141.081: Standard Deduction. Annual CPI-U adjustment formula. Kentucky General Assembly. Retrieved October 7, 2026.
- KRS 141.020: Individual Income Tax Rates. Section (2), 3.50% rate beginning in 2026 and requirements for further reductions. Kentucky General Assembly. Retrieved October 7, 2026.
- Consumer Price Index: August 2026. September 11, 2026. All-items CPI-U, U.S. city average, 12-month change before seasonal adjustment. U.S. Bureau of Labor Statistics. Retrieved October 7, 2026.
- County Employment and Wages in Kentucky: First Quarter 2026. September 2, 2026. Table 1, preliminary average weekly wages in covered employment. U.S. Bureau of Labor Statistics. Retrieved October 7, 2026.