Capital gains: Taxed as ordinary income.
What changed: Flat rate cut from 4.0% to 3.5% on Jan. 1, 2026 (H.B. 1, 2025).
| January 1, 2026 | Kentucky flat income tax rate cut to 3.5% The flat rate fell from 4% to 3.5% under revenue triggers ratified by H.B. 1 (2025); Kentucky retains its inheritance tax on non-close relatives. | In effect |
California's combined top marginal rate reaches 14.4% and NYC residents face up to 14.776%, even as Georgia, Indiana, Kentucky and six other states cut income tax rates on January 1.
Eight states cut individual income tax rates for 2026 while New York extends its temporary surtaxes on high earners, reshaping the state bill for affluent households and anyone weighing a move.