State guide · Kentucky · 2026 rules

S corporation in Kentucky: what the election changes

Kentucky’s entity tax and annual fee stay the same for an LLC that elects. The changes are payroll tax on your salary and, in Louisville or Lexington, who pays the local license tax.

Updated October 24, 202610 official sources

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You’ll need: last year’s Schedule C (line 31) and the W-2 from any job you also hold. Everything else starts at a typical value you can change.

State where the business is Each state treats the election differently. The check shows only the questions that matter there.

Net profit for the year, before paying yourself Your business's profit after expenses. Money you take out for yourself does not lower it.

Where do I find this?

Schedule C, line 31 (“Net profit or (loss)”) on last year’s return.

For this year: sales minus business expenses so far, scaled to a full year. Owner draws are not an expense.

Salary you would pay yourself as an S corporation What you would pay yourself through payroll. The IRS expects a reasonable salary for the work you do.

Where do I find this?

No form shows this yet: you choose it. It should be about what you would pay someone else to do your work.

The salary finder just below shows what employees in your job earn in your state or metro area. What the IRS looks at.

Salary finder: what people in your job earn (BLS)

Your job Pick the job closest to what you do most of the week.

Area Pick your metro area if it is listed. Pay varies by area.

Another job I also earn W-2 wages from a job outside this business

Typical values: change them if you know yours

Payroll service, per year typical value Published one-person prices: $492 to $684 a year (October 2026).

Where do I find this?

Your payroll provider’s price page or quote, for one employee: you. Published prices compared.

Extra tax-prep cost for the S-corp return typical value A survey average: the fee for Form 1120-S minus the fee for Schedule C (2020 fees).

Where do I find this?

Ask your preparer what a Form 1120-S (the S corporation’s own return) would cost, then subtract what you pay now for Schedule C.

Your top federal income tax rate Not sure? Keep 22%. It changes line 5 only.

Where do I find this?

Your taxable income is on Form 1040, line 15. Find the rate for that income and your filing status in the IRS rates and brackets table.

Filing status Changes the result only above $200,000 of earnings ($250,000 if married filing jointly, $125,000 if married filing separately).

Where do I find this?

The box checked under Filing Status at the top of your Form 1040.

Choose a state and enter your profit and salary to see the comparison.

The state

Kentucky follows the federal S election for income tax; there is no separate state form.

Every corporation and every limited liability entity pays Kentucky’s limited liability entity tax, including an S corporation. With gross receipts or gross profits of $3 million or less it is the $175 minimum. A single-member LLC already pays it, so the election does not change it. A sole proprietor who forms an LLC or corporation to elect starts paying it.

The annual report fee is $15 for every LLC and corporation, so it does not change either.

Unemployment tax on your salary

Unemployment insurance: 2.7% for a new employer on the first $12,000 of wages in 2026. Kentucky covers corporate officers, including officers of S corporations and of LLCs taxed as corporations.

Local occupational license taxes

Kentucky cities and counties tax net profit and pay. Today a sole proprietor pays on net profit. After the election the S corporation files and pays on its net profit, and it withholds the local tax from your salary.

Louisville Metro: a resident sole proprietor pays 2.2% of net profit, a nonresident 1.45%. After the election the S corporation pays 2.2% on its net profit no matter where you live, because the 0.75% school boards tax applies to every business entity. Your salary is taxed at 2.2% if you live in Jefferson County and 1.45% if not.

Lexington-Fayette: 2.25% on net profit and on pay alike, so the total base changes little. The election adds a business net profits return.

Other cities and counties set their own rates and rules. The calculator covers Louisville Metro and Lexington.

The optional pass-through entity tax

Kentucky’s pass-through entity tax is 3.5% for 2026, elected each year on Form 740-PTET-ELECT. You get a refundable credit for 100% of your share. The calculator leaves it out.

Worked examples

A single-member LLC owner, single filer, 22% federal bracket, default payroll and return costs. The figure is total tax and added costs as an S corporation compared with staying as you are.

Profit / salary	Statewide	Louisville Metro, Jefferson County resident (2.2%)	Louisville Metro, nonresident owner (1.45% on you)	Lexington-Fayette (2.25%)
$80,000 / $45,000	$668 lower	$896 lower	$634 lower	$901 lower
$120,000 / $60,000	$3,069 lower	$3,415 lower	$2,965 lower	$3,423 lower
$200,000 / $90,000	$7,850 lower	$8,431 lower	$7,606 lower	$8,444 lower

Starting payroll in Kentucky

Register for state withholding with the Kentucky Department of Revenue at MyTaxes, and for unemployment insurance with the Office of Unemployment Insurance in its KUIP system. In Louisville Metro, Lexington and other taxing places, you also withhold the local license tax.

New hire paperwork for Kentucky

Other states

All state guides and the map

Sources

Federal figures: IRS Publication 15 (2026), Schedule SE and Form 2553 instructions. Every figure was read on an official page and checked a second time. Checked October 24, 2026. How we check facts.

An estimate from public rules, not tax advice.

Ready to elect? See the Form 2553 steps.

Electing S corp status