No, the recent tax cut Beshear approved won’t lower your taxes right away. Here’s why
When Democratic Gov. Andy Beshear broke ranks with his party and signed a GOP-backed bill to cut the the state’s income tax, he hoped to offer immediate relief to cash-strapped Kentuckians.
Inflation had been driving up grocery bills, and signing House Bill 1 into law, “would put at least a couple hundred dollars in the pockets of most Kentuckians at a time when they need it,” Beshear said.
“Things are tough out there. Inflation is real, and while gas prices have come down, your grocery bill is still way too high. While this issue is temporary, it’s still going to last for some time in the foreseeable future and our people need relief,” the governor said Feb. 17 before signing the bill into law.
Despite that messaging from Beshear, who is running for reelection in November, the new state income tax cut House Bill 1 enacts won’t actually go into effect until Jan. 1, 2024.
Here’s a straightforward explanation of House Bill 1, and more broadly, how much of a break you can expect to get on your taxes this filing season.
What House Bill 1 does (and does not) do
The legislation is pretty straightforward in the change it enacts. House Bill 1 will eventually cut Kentucky’s income tax rate down to 4%, building off a current rate cut that’s already in effect.
The legislation provides that “For taxable years beginning on or after Jan. 1, 2024, the tax shall be 4% of net income.”
Kinsey Morrison, Communications Director for the Kentucky Finance and Administration Cabinet, said there’s an average anticipated tax savings of $284.26 for Kentucky filers when the rate cut from 4.5% to 4% goes into effect next year. The median savings is $159.78, Morrison added.
How much of a tax cut can Kentuckians expect this year?
House Bill 1 continues a policy project by Kentucky Republicans to cut the state’s income tax in 0.5% increments.
An initial cut to the state’s income tax from 5% to 4.5% went into effect Jan. 1 of this year.
Currently, the number of individual returns processed with a calculated tax liability for 2021 is 1,346,150, Morrison told the Herald-Leader.
The average tax liability based on those returns is $4,268.25, Morrison added. That figure represents what filers owe before any eligible tax credits are applied.
Tax Day falls on Tuesday, April 18 this year, and you can find more information on the Kentucky Department of Revenue’s website.
Do you have a question about tax season in Kentucky for our service journalism team? We’d like to hear from you. Fill out our Know Your Kentucky form or email ask@herald-leader.com.
This story was originally published March 7, 2023 at 2:56 PM.