New State Tax Law and Its Potential Impact
Faculty and Staff,
Kentucky House Bill 487 became law on April 27, 2018, which includes the new 5 percent Kentucky flat income tax rate.
Here’s what you need to know about the new law and how its provisions may impact you:
- The new law requires employers to withhold Kentucky income tax of 5 percent on employee taxable wages.
- UK implemented the tax update on the June 15 biweekly payroll. As a result, biweekly employees likely noticed a change in the amount of Kentucky income tax withheld from their paychecks at that time.
- Based on further review and guidance from the Kentucky Revenue Cabinet, we will retroactively apply the new 5 percent rate on the June 29 monthly and biweekly payrolls back to May 1, 2018. Employees will see changes in the amount of Kentucky income tax withheld from their June 29 paychecks.
- For most biweekly employees, the additional Kentucky tax withheld on the June 29 paychecks should be offset by additional income. That’s because certain employee benefits will not be withheld, given that June 29 is the third biweekly payroll in June.
We encourage employees to visit the new KY Tax Answers website to learn more about the tax changes and to review the KY Withholding Tax Formula to better understand how the tax changes apply to them.
Additionally, we also want to take this opportunity to remind employees to review their 2018 federal income tax withholding by utilizing the IRS Withholding Calculator.
You may also want to consult with a tax professional to obtain a better understanding of how federal and state tax reform may impact your 2018 tax filing.
Please contact Payroll Services at 859-257-3946, if you have questions.
Eric N. Monday
Executive Vice President for Finance & Administration