Effective retroactive for wages paid on or after January 1, 2018, the Kentucky Department of Revenue (DOR) has issued revised withholding tables and a new computer formula. This is in response to federal and state tax reform laws that were recently enacted. Although the new tables are effective from January 1, 2018, employers do not have to adjust employees’ withholding for the months before the new tables were released [DOR, 2018 Withholding Tax Table and Formula, released 5-18].
The withholding tables were revised due to federal and state tax reform laws that were recently enacted. The federal Tax Cuts and Jobs Act (Pub. L. 115-97) was passed at the end of 2017 and took effect January 1, 2018. In response to the federal legislation, Kentucky passed its own state tax reform legislation (H.B. 366, L. 2018). Kentucky’s legislation establishes a flat 5% personal income tax rate, retroactive to January 1, 2018. Previously, personal income tax rates ranged from 2% to 6%. Also, employees must not take withholding exemptions for themselves and their dependents, effective January 1, 2018. The new computer formula does not take exemptions into account, only the standard deduction.
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