Self-employed taxes and LLC costs in Kentucky, 2026
Kentucky charges every LLC a minimum entity tax, cuts its flat income tax for 2026, and lets cities tax net profits.
Total tax on this income in 2026
$20,447
Put aside 24% of each payment · $5,112 per quarter
| Self-employment tax (15.3%) | $12,010 |
| Federal income tax | $5,790 |
| Kentucky income tax | $2,647 |
| QBI deduction used | $12,579 |
| Effective rate on all income | 24.1% |
With an S corp election and a $34,000 salary, about $3,561 less tax (check it).
Computed by Radif Partners from IRS and Kentucky agency documents read on October 15, 2026 · How we calculate
Kentucky's flat income tax drops to 3.5 % for 2026, down from 4.0% in 2025, and applies after a standard deduction of $3,360. On $75,000 of profit, a single filer pays $2,322 to the state and $17,817 in total with federal income tax and self-employment tax. The unusual cost is the Limited Liability Entity Tax: even a one-owner LLC owes a $175 minimum each year, on top of a $15 annual report, so after the $40 formation fee the LLC costs $190 a year to keep and $990 over five years. An S corporation owes the same LLET minimum rather than a second one. Local occupational license taxes then reach net profits in many places: Lexington charges 2.25 %, about $1,688 on $75,000, owed on top of everything else and not included in the state totals above.
Kentucky at a glance, 2026
| LLC filing fee | $40 |
| Annual Report | $15 a year |
| Limited Liability Entity Tax minimum (LLET) | $175 a year |
| Income tax | flat 3.5 % |
| S corporation election | followed by the state |
| Tax on $75,000 of profit (single) | $17,817 in all, $2,322 to Kentucky |
A sole proprietor in Kentucky pays nothing to the state for operating as a business. Form an LLC and that changes: the Limited Liability Entity Tax applies to every business with liability protection under state law, single-member LLCs included, and a company whose Kentucky gross receipts or gross profits stay at $3 million or less pays the $175 minimum (Kentucky DOR, LLET). Sole proprietorships and general partnerships are outside it. For a freelancer weighing the LLC, that minimum is the largest recurring state cost, ahead of the $15 annual report filed between January 1 and June 30 (Kentucky SOS, annual reports).
Local tax on business profit
Lexington-Fayette Urban County Government Occupational license fee
$1,800
| Rate | 2.25% |
City and county taxes on net profits
Kentucky's local governments tax business income directly through occupational license taxes. Lexington-Fayette assesses 2.25 % on wages and on business net profits earned in the county (LFUCG Division of Revenue), which on $75,000 of profit is about $1,688. The Lexington page works through the full calculation. Louisville Metro levies its own tax on net profits, but its rate could not be read on the city's site, so we do not quote it; the Louisville Metro Revenue Commission publishes it. Many smaller cities and counties charge similar taxes, and the calculator at the top does not include any of them.
A lower flat rate for 2026
The Department of Revenue's withholding guidance sets the 2026 rate at 3.5 % (Kentucky DOR, withholding), and the standard deduction is $3,360 (2026 standard deduction). A single filer with $120,000 of profit owes $3,786 to the state. Half of self-employment tax reduces federal AGI and therefore the Kentucky base as well. Compared with 2025, the half-point cut lowers the state tax on $75,000 of profit by roughly $332, a modest change next to the federal amounts but a permanent one under current law. The Department's withholding guidance applies the new rate from January 2026, and estimated payments for 2026 income are figured on it as well.
S corporation status changes little at the state level
An LLC that elects S status still owes one LLET minimum, not two, and Kentucky passes the income through to the owner. At $120,000 of profit and a $50,000 salary, the model counts $175 of LLET and a saving of $5,197 after $2,000 of payroll and filing costs; most of it is federal, as the S corp savings calculator shows. A pass-through entity tax, enacted in 2023 and filed on Form 740-PTET, is also available to electing entities, with a refundable credit for the owners (Kentucky DOR, PTET forms).
City and county taxes on business income in Kentucky
| Place | Tax | Rate | Who pays |
|---|---|---|---|
| Louisville Metro (Jefferson County) | Occupational license tax on wages and net profits (Metro + school board + TARC) | varies | Rate not verified: louisvilleky.gov blocked (Cloudflare 403). Commonly published total 2.20% for residents and 1.45% for nonresidents - unverified. |
| Lexington-Fayette Urban County Government | Occupational license fee | 2.25% | plus school board tax on some items not verified |
| Many other Kentucky cities and counties | Local occupational license taxes on net profits/wages | varies | No official consolidated list was read today |