Key figures
Kentucky accounting
2026, with sources
Two taxes on Form 720
Kentucky taxes corporations at a flat 5% on income apportioned to the state and adds the limited liability entity tax (LLET), a tax on gross receipts or gross profits that applies to corporations and LLCs alike. Below $3 million of total gross receipts or gross profits the LLET is a flat $175; above $6 million it is the lesser of 0.095% of Kentucky gross receipts or 0.75% of Kentucky gross profits. Both are reported on Form 720, due the 15th day of the fourth month after year end, with a seven-month extension available.
Related corporations in a unitary business file a unitary combined return. Income is apportioned on a single sales factor, with receipts from services sourced to where the service is delivered.
Conformity with three exceptions that matter
Kentucky conforms to the Internal Revenue Code as of a fixed date. HB 757, enacted April 14, 2026, moved it to December 31, 2025 for tax years beginning on or after January 1, 2026, but decoupled from Section 174A domestic research expensing and kept the Section 163(j) interest limitation as it stood at the end of 2024. Kentucky also has never adopted bonus depreciation: only Section 168 as in effect on December 31, 2001 is allowed.
For a startup that expenses $600,000 of engineering salaries federally in 2026, Kentucky adds the $600,000 back and deducts it over five years under the old Section 174 rules. In a loss year that only changes the size of the Kentucky loss, which carries forward indefinitely subject to the federal 80% limit.
Estimated payments
Kentucky corporate estimated tax is paid in four 25% installments, due April 15, June 15, September 15 and December 15 for a calendar-year company.
Deadlines
- 15th day of the 4th month after year endCorporation income tax and LLET return; a valid extension gives seven monthsForm 720
- April 15, June 15, September 15 and December 15Estimated tax, 25% each installment
The federal baseline
This page covers what Kentucky adds. The federal rules underneath it apply here too.
Common questions
Does Kentucky follow the 2025 federal R&D expensing?
Not for domestic research costs. HB 757 moved Kentucky to the Code as of December 31, 2025 for tax years beginning in 2026, but it adds back the Section 174A deduction and allows only what Section 174 as of December 31, 2024 would have allowed, which is five-year amortization. For 2025 returns Kentucky still uses the Code as of December 31, 2024.
Do we owe Kentucky tax in a loss year?
Yes, if it has activity in Kentucky. Every corporation and LLC doing business in Kentucky pays the limited liability entity tax, which is at least $175 even with no profit. Above $6 million of gross receipts or gross profits it becomes the lesser of 0.095% of Kentucky gross receipts or 0.75% of Kentucky gross profits, with a sliding scale between $3 million and $6 million.
Do we file one Kentucky return for the group?
Kentucky requires a unitary combined return for related corporations in a unitary business. A Delaware parent with a Kentucky operating subsidiary generally files one combined Form 720 for the unitary group, rather than a return for the subsidiary alone.
Accounting next door
- ILIllinois accountingIllinois taxes a C corporation’s income at 7% plus a 2.5% replacement tax, apportioned by a single sales factor and filed as a combined unitary group.
- INIndiana accountingIndiana taxes C-corps at 4.9% on a single receipts factor, files separately, adds back bonus depreciation and lets 2022–2024 research costs be deducted in full.
- MOMissouri accountingMissouri taxes corporations at a flat 4% on income apportioned by a single sales factor, with services sourced to the customer. There is no franchise tax.
- OHOhio accountingOhio has no corporate income tax; its 0.26% Commercial Activity Tax excludes the first $6 million of Ohio receipts, so the business tax a startup actually meets is its city’s net profit tax.
- TNTennessee accountingTennessee taxes corporations through a 6.5% excise tax on earnings and a 0.25% franchise tax on net worth, apportioned on a single sales factor from 2025, with the property measure repealed in 2024.
- VAVirginia accountingVirginia taxes corporations at a flat 6% with a double-weighted sales factor and cost-of-performance sourcing. It conforms to the IRC as of December 31, 2025 but decoupled from the 2025 R&D expensing and from bonus depreciation.
- WVWest Virginia accountingWest Virginia taxes corporations at 6.5% with mandatory combined reporting, a single sales factor and market-based sourcing since 2022, and conforms to federal tax changes enacted through 2025.
Founder guides on this
- R&D taxThe R&D tax credit and Section 174A for startupsEngineering salaries can earn a federal R&D credit against payroll tax, and Section 174A lets you deduct US research again. What qualifies, what to track.
- US GAAPUS GAAP for early-stage startups, in plain EnglishAccrual accounting, revenue recognition (ASC 606), leases (ASC 842), stock compensation and capitalized software: what each means for a small company.
- The closeWhy startups should close their books every monthA monthly close turns a bank balance into numbers an investor, an auditor or a 409A firm will accept. What it is, and why it gets expensive to skip.
More of the Kentucky guide
- ReceivablesReceivables and sales tax in KentuckySales tax registration, economic nexus, whether SaaS is taxable, and collecting from customers
- PayablesPayables and contractors in KentuckyPaying vendors and contractors: 1099 filing, use tax, contractor tests and withholding
- PayrollPayroll taxes and employer rules in KentuckyWithholding, unemployment insurance, paid leave, minimum wage and the rules on paydays
- ComplianceCompliance and filings in KentuckyRegistering to do business, annual reports, franchise tax and the filing calendar
- AdvisoryAdvisory: credits and decisions in KentuckyCredits, incentives and the decisions that are cheaper to get right the first time
Sources
Checked against each agency’s own page on . Rates and thresholds change, usually on January 1.
General information for US companies, not tax, legal or accounting advice for yours. Rules and thresholds change; confirm the specifics with a CPA or the agency before you act on them.