Lexington occupational license fee on self-employment profit, 2026
Kentucky lets its cities and counties tax earnings where the work is done, and Lexington-Fayette applies one rate to wages and business profit.
Lexington-Fayette Urban County Government Occupational license fee, 2026
$2,025
Total with federal and Kentucky tax: $24,151
| Local rate applied to net profit | 2.25% |
| Self-employment tax | $12,717 |
| Federal income tax | $6,599 |
| Kentucky income tax | $2,810 |
Computed by Radif Partners from the Lexington finance department, read on October 15, 2026 · How we calculate
The Lexington-Fayette Urban County Government charges an occupational license fee of 2.25% on individual compensation and on business net profits earned in Lexington-Fayette County. Despite the name, it works like a flat income tax on the work done in the county: a freelancer with $75,000 of net profit from work there owes about $1,688. A school board tax may apply to some items, but its scope could not be confirmed on an official page. At the state level, Kentucky taxes income at a flat 3.5 % for 2026, which comes to $2,322 on the same profit for a single filer. A Kentucky LLC adds a $15 annual report and the $175 minimum Limited Liability Entity Tax, which applies even to single-member LLCs. Louisville Metro levies its own occupational license tax on wages and net profits, but its rate could not be read on an official page and is not given here.
Kentucky is unusual in how its local governments raise money. Instead of a city income tax tied to residence, many cities and counties levy an occupational license tax on the wages and business profits earned within their borders. Lexington and Fayette County merged into a single government, so one charge covers the whole county: 2.25% on individual compensation and net profits (LFUCG Division of Revenue).
Local tax on business profit
Lexington-Fayette Urban County Government Occupational license fee
$1,800
| Rate | 2.25% |
Where the work is done, not where you live
The fee follows the place of work. A freelancer who lives in a neighboring county and works for Lexington clients from an office in the city owes it on the profit earned there; a Lexington resident who works entirely elsewhere may owe the local tax of that other place instead. The base is net profit, so expenses on Schedule C reduce it, and the rate is flat: 2.25% of the first dollar as of the last. The school board tax that can apply on some items is not included in the calculator above, because its scope was not confirmed.
Put the three layers together for a single filer with $75,000 of profit earned in Lexington: $15,495 of federal income and self-employment tax, $2,322 to Kentucky and $1,688 to LFUCG, or $19,504 in all. The local fee is the smallest of the three, and it has no standard deduction or personal exemption of its own.
The state rate cut and the LLC entity tax
Kentucky's individual rate is 3.5 % for 2026, the rate the Department of Revenue uses in its 2026 withholding guidance (Kentucky DOR, withholding). It is flat, applies to the same Schedule C profit, and is owed on top of the Lexington fee; the two are filed with different agencies.
The LLC brings its own state charge. Every Kentucky LLC, a single-member one included, owes the Limited Liability Entity Tax each year, at a minimum of $175 when Kentucky gross receipts or gross profits are $3 million or less (Kentucky DOR, LLET). Add the $15 annual report to the Secretary of State and the $40 filing fee, and a Lexington LLC costs $990 over five years in state charges alone, more than a sole proprietorship that pays neither. The LLC cost comparison puts that figure next to the other states.
Louisville and the rest of Kentucky
Louisville Metro (Jefferson County) levies an occupational license tax on net profits and wages that combines the Metro government, the school board and the transit authority, TARC. Its rates are posted by the Louisville Metro Revenue Commission, which could not be read for this page, so no rate is given here. Many other Kentucky cities and counties levy similar taxes, at rates each sets for itself; no official statewide list was read. The Kentucky page covers the state rules, and the local business taxes guide compares Lexington with cities in other states.