Kentucky · Foreign Tax Credit (Investments)
Foreign Tax Credit (Investments) in Kentucky (2026)
Credit for foreign taxes paid on international investments to avoid double taxation. Kentucky has a flat 3.5% income tax, so a Kentucky filer's combined marginal rate on the next dollar at $55,573 of income is about 15.5% (12% federal + 3.5% KY).
2026 savings example for Kentucky
Planning estimate for a single filer earning $55,573 (Kentucky median household income in LevyIO's state dataset) who claims a $5,000 credit. Federal tax uses the 2026 IRS brackets after the $16,100 standard deduction; KY tax uses the state brackets in LevyIO's dataset and assumes the state follows the federal treatment.
Estimated total savings
$4,489
Federal savings
$4,489
$4,489 → $0 · 12% bracket
KY state savings
$0
Federal credit only; check for a state credit
Combined marginal rate
15.5%
Credits do not depend on the bracket
Federal × Kentucky marginal rates (2026, single)
Gross-income ranges include the federal standard deduction. The KY column is the state marginal rate at the midpoint of each range. A credit saves its face value regardless of bracket.
| Federal bracket | Gross income (single) | KY marginal | Combined | Per $1,000 |
|---|---|---|---|---|
| 10% | $16,100 - $28,500 | 3.5% | 13.5% | $1,000 |
| 12% | $28,500 - $66,500 | 3.5% | 15.5% | $1,000 |
| 22% | $66,500 - $121,800 | 3.5% | 25.5% | $1,000 |
| 24% | $121,800 - $217,875 | 3.5% | 27.5% | $1,000 |
| 32% | $217,875 - $272,325 | 3.5% | 35.5% | $1,000 |
| 35% | $272,325 - $656,700 | 3.5% | 38.5% | $1,000 |
| 37% | Over $656,700 | 3.5% | 40.5% | $1,000 |
Eligibility & forms
Investors paying foreign taxes on international investments
- Foreign taxes paid
- Credit or deduction choice
- Form 1116 for over $300
Federal forms: Form 1116, Form 1099-DIV
Kentucky filing notes
Flat 3.5% simplifies planning. Be aware of inheritance tax for non-immediate family. Kentucky offers pension exclusions up to $31,110. Standard deduction is low ($3,360).
Common mistakes: Taking deduction instead of credit; Missing foreign tax on 1099.
Frequently asked questions
How much can the Foreign Tax Credit (Investments) save a Kentucky taxpayer in 2026?
Credits reduce tax dollar-for-dollar. In LevyIO's example, a single filer with $55,573 of income (the Kentucky median household income in our state dataset) and a $5,000 credit would cut 2026 federal tax from $4,489 to $0, a $4,489 saving. Whether Kentucky offers a matching state credit depends on the KY return, so the estimate counts federal savings only.
What is the Kentucky income tax rate for 2026?
Kentucky has a flat 3.5% income tax. The KY standard deduction in LevyIO's dataset is $3,360 single / $3,360 married. Flat 3.5% for 2026 (reduced in stages from 5%). Inheritance tax (4-16%). Pension exclusion up to $31,110.
Who qualifies for the Foreign Tax Credit (Investments) in Kentucky?
Investors paying foreign taxes on international investments. The federal rules are the same in every state; the requirements are: Foreign taxes paid; Credit or deduction choice; Form 1116 for over $300. Kentucky filers should confirm on the KY return whether the state follows the federal treatment.
Which forms do I file to claim the Foreign Tax Credit (Investments)?
Federal: Form 1116, Form 1099-DIV. Kentucky: check the Kentucky Department of Revenue instructions for the matching state schedule. Common mistakes: Taking deduction instead of credit; Missing foreign tax on 1099.
Foreign Tax Credit (Investments) in other states
Sources
Reviewed 2026-09-17. Estimates are educational planning figures computed from the IRS 2026 inflation adjustments and LevyIO's state bracket dataset; they are not tax advice.