The short version
- Social Security taxed?
- No
- Income tax
- Flat 3.5% in 2026
- Property tax on a $300,000 home
- ≈ $2,220 / yr ($185 / mo)
- Everyday cost index (U.S. = 100)
- 92
- January / July high
- 43°F / 88°F
- Sales tax (state + local avg)
- 6.00%
Retiring in Kentucky
A big pension exclusion, a falling flat tax, and low costs. Watch out: the inheritance tax can surprise families who leave assets to siblings or friends.
How Kentucky taxes your retirement income
Social Security: not taxed at all.
Pensions: $31,110 pension exclusion per person.
401(k) and IRA withdrawals: The $31,110 exclusion covers 401(k)/IRA withdrawals.
The setup: Flat 3.5% in 2026.
Property tax & senior breaks
The average effective property tax rate is about 0.74% — roughly $2,220 a year ($185 a month) on a $300,000 home. Your county sets the real number.
Help for seniors: Homestead exemption (about $46,000 of value, indexed) for homeowners 65+.
Try your own home value in the Property Tax Estimator.
Everyday costs & sales tax
Overall cost of living runs about 8% below the U.S. average. The combined state and average local sales tax is 6.00%.
Weather
January days top out around 43°F and July days around 88°F, with roughly 195 sunny days a year. Watch out for: Tornadoes and river flooding; four full seasons.
Healthcare
Louisville and Lexington care is strong; Appalachian east Kentucky has gaps.
Estate & inheritance taxes
Kentucky has an inheritance tax. Inheritance tax on some heirs; spouses and children are exempt