Kentucky Nonresident or Part-Year Resident Return Packet Instructions

Nonresident or Part-Year Resident Return Packet Instructions
Form 740-IN Instructions
COMMONWEALTH OF KENTUCKY
DEPARTMENT OF REVENUE
FRANKFORT, KENTUCKY 40620
42A740-NP(P) (10-23)

740-NP
2023 Kentucky
Income Tax Return
Nonresident or
Part-Year Resident
Who must file Form 740-NP?

•	
•	
•	

Full-year nonresidents with income from Kentucky sources
Persons moving into Kentucky
Persons moving out of Kentucky

		 
Electronic Filing—It’s to your advantage! Choose one of these easy methods!
Federal/State Electronic Filing—Individuals who use a professional tax practitioner to prepare their Kentucky income tax return can file
both their state and federal returns by using the E-File Program. With no data entry, you can have your refund in just a few short weeks.
Federal/State Online Filing—This filing method offers the same benefits as the Federal/State E-Filing Program, but you prepare and file
your return from the convenience of your own home computer.

TAXPAYER ASSISTANCE—revenue.ky.gov
Refund Inquiries—You may check the status of your refund at refund.ky.gov. This system is available 24 hours a day,
7 days a week and is updated nightly.
The following information from your return will be required:
•	 Your Social Security number shown on the return.
•	 The exact whole-dollar amount to be refunded to you.

Kentucky Taxpayer Service Centers—Information and forms are available in the following locations:
Ashland
1539 Greenup Avenue, Suite 501, 41101–7695
(606) 920–2037

Louisville
600 West Cedar Street
2nd Floor West, 40202–2310
(502) 595–4512

Bowling Green
201 West Professional Park Court, 42104–3278
(270) 746–7470

Northern Kentucky
Turfway Ridge Office Park
7310 Turfway Road, Suite 190
Florence, 41042–4871
(859) 371–9049

Corbin
15100 North US 25E, Suite 2, 40701–6188
(606) 528–3322
Frankfort
501 High Street, 40601–2103

Owensboro
Corporate Center
401 Frederica Street
Building C, Suite 201, 42301–6295
(270) 687–7301

(502) 564–5930 (Taxpayer Service Center)
(502) 564–4581 (General Information)
(502) 564–3658 (Forms)

Paducah
Clark Business Complex, Suite G
2928 Park Avenue, 42001–4024
(270) 575–7148

Hopkinsville
181 Hammond Drive, 42240–7926
(270) 889–6521

Pikeville
Uniplex Center, Suite 203
126 Trivette Drive, 41501–1275
(606) 433–7675

Kentucky Department of Revenue
Mission Statement
As part of the Finance and Administration Cabinet, the mission of the Kentucky Department of
Revenue is to administer tax laws, collect revenue, and provide services in a fair, courteous,
and efficient manner for the benefit of the Commonwealth and its citizens.

* * * * * * * * * * * * * * * * * *
The Kentucky Department of Revenue does not discriminate on the basis of race, color,
national origin, sex, age, religion, disability, sexual orientation, gender identity, veteran
status, genetic information or ancestry in employment or the provision of services.

2023 FEDERAL/KENTUCKY INDIVIDUAL INCOME TAX DIFFERENCES
The chart below provides a quick reference guide to the major federal/
Kentucky differences. It is not intended to be all inclusive. Items not listed
may be referred to the Department of Revenue to determine Kentucky
tax treatment.

Kentucky income tax law is based on the federal income tax law in effect
on December 31, 2022. The Department of Revenue generally follows
the administrative regulations and rulings of the Internal Revenue Service
in those areas where no specific Kentucky law exists.
PROVISION
  1.	 Interest from Federal Obligations

FEDERAL
TAX TREATMENT

KENTUCKY
TAX TREATMENT

Taxable

Exempt

  2.	 Retirement Income from:
	

Commonwealth of Kentucky Retirement Systems

Taxable

	

Kentucky Local Government Retirement Systems

Taxable

	

Federal and Military Retirement Systems

Taxable

Partially exempt if retired
  after December 31, 1997;
  exempt if retired before
  January 1, 1998;
  Schedule P may be required

3-year recovery rule eliminated

3-year recovery rule retained

Taxable

100% excludable up to $31,110 per
taxpayer; Schedule P may be required

  5.	 Benefits from U.S. Railroad Retirement Board

May be taxable

Exempt; Schedule P may be required

  6.	 Social Security Benefits

May be taxable

Exempt

  7.	 Capital Gains on Sale of Kentucky Turnpike Bonds

Taxable

Exempt

  8.	 Other States’ Municipal Bond Interest Income

Exempt

Taxable

  9.	 Kentucky Local Government Lease Interest Payments

Taxable

Exempt

10.	 Capital Gains on Property Taken by Eminent Domain

Taxable

Exempt

11.	 Election Workers—Income for Training or Working at Election
	Booths

Taxable

Exempt

  3.	 Pensions and Annuities Starting After 7/1/86 and Before 1/1/90
  4.	 Other Pension and Annuity Income

12.	 Artistic Contributions

Noncash contribution allowed as Appraised value allowed as itemized
itemized deduction
deduction or adjustment to income

13.	 State Income Taxes

Deductible

Nondeductible

14.	 Leasehold Interest—Charitable Contribution

May be deductible

Deductible; Schedule HH required

15.	 Work Opportunity Credit (federal Form 5884)

Tax credit allowed; wage expense
reduced by amount of credit

No credit allowed

16.	 Welfare to Work Credit (federal Form 8861)

Tax credit allowed; wage expense
reduced by amount of credit

No credit allowed

Tax credit based on expenses

20% of federal credit

17.	 Child and Dependent Care Credit
18.	 Family Size Tax Credit

No credit allowed

19.	 Education Tuition Tax Credit

Tax credit based on expenses

20.	 Child’s Income Reported by Parent

Decreasing tax credit allowed
Credit allowed
  Form 8863-K required

Permitted; taxed at parent’s rate

Not permitted

Taxable

Exempt

22.	 Certain Business Expenses of Reservists

Deductible

Nondeductible

23.	 Moving Expenses for Members of the Armed Forces

Deductible

Nondeductible

24.	 Medical and Dental Expenses

Deductible

Nondeductible

25.	 Local Income Taxes

Deductible—limited

Nondeductible

26.	 Real Estate Taxes

Deductible—limited

Nondeductible

27.	 Personal Property Taxes

Deductible—limited

Nondeductible

Deductible

Nondeductible

Nondeductible

Nondeductible

21.	 Active Duty Military Pay

28.	 Casualty and Theft Losses
29.	 Job Expenses and Other Miscellaneous Deductions

1

What’s New
STANDARD DEDUCTION—For 2023, the standard deduction is $2,980.
FAMILY SIZE TAX CREDIT—This credit provides benefits to individuals and families at incomes up to 133 percent of
the threshold amount based on the federal poverty level. The 2023 threshold amount is $14,580 for a family size of one,
$19,720 for a family of two, $24,860 for a family of three, and $30,000 for a family of four or more.
INTERNAL REVENUE CODE DATE—HB 360 updated KRS 141.010(21) to change the Internal Revenue Code (IRC)
reference date from December 31, 2021, to December 31, 2022, for purposes of computing corporation and individual
income taxes. However, taxpayers who placed property into service after September 10, 2001 are required to compute
Kentucky depreciation under IRC Section 168 according to the provisions in effect on December 31, 2001. Taxpayers who
placed property into service after September 10, 2001 but before January 1, 2020 are required to compute the expense
deduction under IRC Section 179 according to provisions in effect on December 31, 2001. Taxpayers who placed property
into service on or after January 1, 2020 are required to compute the expense deduction under IRC Section 179 according to
provisions in effect on December 31, 2003, except that the phase-out provisions of IRC Section 179, limiting the qualifying
investment in property, shall not apply.
REFUNDABLE PASS-THROUGH ENTITY TAX CREDIT—The Kentucky General Assembly passed HB 5 during the 2023
Regular Session that established a new Section of KRS Chapter 141 allowing an authorized person to make an annual
election to file and pay income tax at the entity level on behalf of the pass-through entity effective for tax years beginning
January 1, 2022. Individual owners filing Kentucky individual income tax returns with tax imposed by KRS 141.020 are
allowed the refundable pass-through entity tax credit passed through on Form PTET-CR. The credit may be claimed on
Kentucky Form 740 or Form 740NP, line 31(g), Refundable Pass-Through Entity Tax Credit.
TREATMENT OF RESTAURANT REVITALIZATION GRANTS—For taxable years beginning on or after January 1, 2020,
but before March 11, 2023, HB 360 provides that Kentucky will treat Restaurant Revitalization Grants in the same manner
as the IRS. This means that the grants are not included in gross income and expenses paid for by funds from the grants
are fully deductible.
KENTUCKY ENTERTAINMENT INCENTIVE (KEI) TAX CREDIT—House Bill 303 made various changes to the KEI tax
credit, allocating $25 million for approved continuous production film companies and clarifying that payroll expenditures of
loan-out entities can be included in the credit calculation.

Reminders
REFUNDABLE DEVELOPMENT AREA TAX CREDIT—If you owned “residential property” on January 1, 2021 that was
located in the West End Development area in Louisville, Kentucky you may be entitled to a refundable development area
tax credit. To qualify for the credit, it must by your principal place of residence, located within the West End development
area and owned as of January 1, 2021. Your credit will be equal to the amount in which the property tax timely paid on the
residential property exceeds the amount of property tax assessed on that residential property on January 1, 2021. KRS
141.398.
REFUNDABLE DECONTAMINATION CREDIT—For taxable years on or after January 1, 2022, but before January 1, 2032,
a taxpayer making a qualifying expenditure at a qualifying decontamination property shall be allowed a refundable credit
against the taxes imposed by KRS 141.020 or 141.040. The taxpayer must by approved by the Energy and Environment
Cabinet per KRS 224.1-420. Maximum tax credit allowed to be claimed per taxable year is 25 percent of the approved
credit. For more information regarding credit for decontamination, contact the Energy and Environment Cabinet at 502-5646716. A copy of the approved application must be attached to the tax return claiming this credit. KRS 141.419.

2

42A740-NP(I) (10-23)

2023 Kentucky Individual Income Tax
Instructions for Form 740-NP

General Information

Which form should I file?
File Form 740 if you are a full-year
Kentucky resident and meet the filing
requirements in the Instructions for
Form 740.
File Form 740-NP if you are a nonresident and:
•	 had income from Kentucky sources.
or are a part-year Kentucky resident and:
•	 moved into or out of Kentucky during the
taxable year.
•	 had income while a Kentucky resident.
•	 had income from Kentucky sources while
a nonresident.
File Form 740-NPR if you are a resident
of a reciprocal state: Illinois, Indiana,
Michigan, Ohio, Virginia, West Virginia
and Wisconsin and you had Kentucky
income tax withheld and had no other
income from Kentucky sources.

Computer–Generated
Returns and 2–D
Barcode
Most software packages produce a 2-D
barcode. The Department of Revenue
scans the barcode that contains all of the
information needed to process your return.
The barcode is printed in the upper righthand corner of the return when you prepare
your return using an approved software
package. Last minute changes should
be entered into the program and the entire
return printed again so that the barcode
also contains the correct information.
This barcode should not be covered up or
marked through. Using the barcode reduces
data entry errors for the department and
results in a faster refund for you.
Check to be sure your software generates
an acceptable form. A list of vendors whose
software has been approved is posted on the
Internet at revenue.ky.gov, the Department
of Revenue’s website.

Free Electronic Filing
Options
You may visit https://revenue.ky.gov/
Individual/Pages/FreeFileSoftware.
aspx for free electronic filing options.
You may qualify to file your federal and
Kentucky individual income tax returns
for free depending on your income level.
Some offers require state and federal
returns to be filed at the same time. The
Kentucky Department of Revenue does
not endorse any specific tax filing product.
Each software company is responsible
for the accuracy of the software program
instructions and calculations. However, all
software packages will produce a return
which contains the required data fields. The
Kentucky Department of Revenue does
not offer technical assistance for these
software products. You should contact the
tax software customer service department
if you have issues using any of the software
products.
Kentucky also offers another option for
filing your state return electronically, free
of charge. If you would like to fill out your
Kentucky forms and schedules without
software help or assistance you may use
the KY File website.
KY File allows you to file current year
Kentucky individual income tax returns
and is designed to be the simple electronic
equivalent of a paper form. It will provide
basic mathematical and error checks but
unlike most other software it does not
ask about or explain tax situations. Your
federal forms should be completed before
accessing the KY File website. You can
access the KY File website at Filetaxes.
ky.gov .

Where to Get Forms
Forms and instructions are available
online from the Department of
Revenue’s website at revenue.ky.gov
and at all Kentucky Taxpayer Service
Centers. They may also be obtained by
writing FORMS, Kentucky Department of
Revenue, 501 High Street, Station 23B,
Frankfort, KY 40601, or by calling (502)
564-3658.
3

Address Change
If you move after you file your tax return,
please notify the Kentucky Department of
Revenue of your new address. This can
be done by sending a change of address
card (available at your local post office) to:
Taxpayer Assistance Section, Kentucky
Department of Revenue, P.O. Box 181,
Station 56, Frankfort, KY 40602-0181.
Notification can also be made to any
Kentucky Taxpayer Service Center. A list
of locations is included in your packet.

Refund Inquiries
You may check the status of your refund at
refund.ky.gov. This system is available 24
hours a day, 7 days a week, and is updated
nightly. The following information from your
return will be required:
•	 Your Social Security Number shown on the
return.
•	The exact whole-dollar amount to be
refunded to you.
Information about electronically filed returns
should be available within 72 hours of
receipt. Information about other refund requests filed on paper will be available after
the return has completed initial processing
(approximately 12 weeks).

Need a Copy of
Your Tax Return?
If you need a copy of your tax return,
you must send your request in writing to:
Taxpayer Assistance Section, Kentucky
Department of Revenue, P.O. Box 181,
Station 56, Frankfort, KY 40602-0181 or
fax to (502) 564-3392. Please include your
name(s) as it appeared on your return,
Social Security number(s), your complete
mailing address, and a photo ID. To ensure
confidentiality, all requests must include
your signature.

How Long Should
Records be Kept?
Keep a copy of your tax return, worksheets
and records of all items appearing on it
(such as Forms W-2 and 1099 or other
receipts) until the statute
of limitations runs out for
that return. Usually, this is
four years from the date the
return was due or filed (with
extensions), or the date the
tax was paid, whichever
is later. You should keep
some records longer. For
example, keep property records (including
those on your home) as long as they are
needed to figure the basis of the original or
replacement property.

Filing as an Injured
Spouse on Your
Federal Form 1040?
Kentucky does not recognize the federal
injured spouse form. Income tax refunds
may be withheld by the department if you
owe money to the Kentucky Department
of Revenue, another state agency or the
Internal Revenue Service.
Kentucky law requires the offset of the entire
refund if a joint return is filed. If spouses
want to keep their tax liabilities and/
or refunds separate, each must file
a separate tax form. If you choose to
file separately on a combined return, for
agencies other than the Department of
Revenue, the refund will be apportioned
between spouses, based on each spouse’s
income. The indebted spouse’s refund will
then be paid to the appropriate agency.

Death of a Taxpayer
If a taxpayer died before filing a return for
2023, the taxpayer’s spouse or personal
representative may have to file and sign
a return for that taxpayer. A personal
representative c an be an executor,
administrator or anyone who is in charge
of the deceased taxpayer’s property. If the
deceased taxpayer did not have to file a
return but had tax withheld, a return must
be filed to get a refund. The person who
files the return should check the applicable
deceased box at the top of the return.

If your spouse died in 2023 and you did
not remarry in 2023, you can file jointly or
separately on a combined return. The return
should show your spouse’s 2023 income
before death and your income for all of
2023. You can also file jointly or separately
on a combined return if your spouse died
in 2024 before filing a 2023 return. Write
“Filing as surviving spouse” in the area
where you sign the return. If someone else
is the personal representative, he or she
must also sign.

Death of Military
Personnel Killed
in Line of Duty
KRS 141.019(k) exempts all income earned
by soldiers killed in the line of duty from
Kentucky tax for the year during which the
death occurred and the year prior to the year
during which the death occurred.
The exemption applies to tax years
beginning after December 31, 2001. The
income exclusion applies to all income
from all sources of the decedent, not just
military income. The exclusion includes all
federal and state death benefits payable to
the estate or any beneficiaries.
Amended returns may be filed for the year
the soldier was killed in the line of duty and
the year prior to the year of death. The
amended returns must be filed within the
statute of limitations period; four years from
the due date, the extended due date or the
date the tax was paid, whichever is later.
If a combined return was filed, the exclusion
would apply to the income reported in
Column A or Column B of the Kentucky
return attributable to the military member.
If a joint return was filed, the income must
be separated accordingly. Refunds will be
issued in the names on the original return.
Beneficiaries or estates that received death
benefits that were included in a Kentucky
return may file an amended return to request
a refund of taxes paid on the benefit.
The Department of Revenue will use the
Veterans Administration definition for “in
the line of duty,” which states that a soldier
is in the line of duty when he or she is in
active military service, whether on active
duty or authorized leave; unless the death
was the result of the person’s own willful
misconduct.

4

Income Tax Withholding
for 2024
You may elect to increase your withholding
by updating your Form K-4 with your
employer. Or if you do not expect to
have any tax liability for the current year
or you meet the modified gross income
requirement, you may be entitled to claim
an exemption from withholding of Kentucky
income tax.

2024 Estimated Tax
Payments
Individuals who can reasonably expect
to have income of more than $5,000
from which no Kentucky income tax will
be withheld may be required to make
estimated tax payments on Form 740-ES.
However, if the amount of estimated tax is
$500 or less, no estimated payments are
required. Individuals who do not prepay at
least 90% of the tax to be shown on the
2024 tax return, or 100% of the tax shown
on the 2023 tax return, may be subject to
a penalty for underpayment of estimated
tax. For more information on calculating
the penalty, please refer to Form 2210‑K.
Prepayments for 2024 may be made
through withholding, a credit forward of
a 2023 overpayment or estimated tax
installment payments.
Estimated tax installments may
now be made electronically at
revenue.ky.gov, using Form EPAY, or when
electronically filing your return using Form
8879-K, or through mailing a 740-ES with
payment.
The instructions for Form 740-ES include
a worksheet for calculating the amount
of estimated tax due and for making
installment payments. These forms may
be obtained from the Kentucky Department
of Revenue, P. O. Box 518, Frankfort, KY
40602-0518, or any Kentucky Taxpayer
Service Center, or by calling (502) 5643658.

Return Adjustments

Confidentiality

If the Department of Revenue adjusts
your return and you do not understand the
adjustment(s), you may write to Taxpayer
Assistance, Kentucky Depar tment of
Revenue, P.O. Box 181, Station 56,
Frankfort, KY 40602-0181, fax your request
to Taxpayer Assistance (502) 564-3392,
or call (502) 564-4581. Please include
your name(s) as it appears on your return,
complete Social Security Number(s),
notice number(s), and daytime contact
information.

Kentucky Revised Statute 131.190 requires
the Department of Revenue to maintain
strict confidentiality of all taxpayer records.
No employee of the Department of Revenue
may divulge any information regarding the
tax returns, schedules or reports required
to be filed. However, the Department of
Revenue is not prohibited from providing
evidence to or testifying in any court of
law concerning official tax records. Also,
Department of Revenue employees
or any other person authorized to
access confidential state information
are prohibited from intentionally viewing
such information without an official need
to view.

If you disagree with an adjustment made
to your return, you must appeal the
adjustment by submitting a written protest
within 60 days of notification.

Amended Returns
I f yo u d i s c ove r t h at yo u o m i t te d
deductions or other wise improperly
prepared your return, you may obtain
a refund by filing an amended return
within four years of the due date of the
original return. You are required to file
an amended return to report omitted
income. For 2017 and later use form
740 and check the box for amended.
For 2016 and prior, use Form 740-X. You
may obtain these forms by contacting
a Kentucky Taxpayer Service Center
or writing FORMS, Kentucky Department
of Revenue, P. O. Box 518, Frankfort, KY
40602-0518.  You may also download
forms at revenue.ky.gov the Department
of Revenue’s website.

Federal Audit
Adjustments
Taxpayers who have received a final
determination of an Internal Revenue
Service audit must submit a copy to
the department within 180 days of its
conclusion. The information should be
submitted to the Individual Governmental
Program Section, Kentucky Department
of Revenue, P.O. Box 1074, Station 68,
Frankfort, KY 40602-1074.

The department may provide official
information on a confidential basis to the
Internal Revenue Service or to any other
governmental agency with which it has
an exchange of information agreement
whereby the department receives similar
or useful information in return.

Extension of Time
to File
Taxpayers who are unable to file a return by
April 15 may request an extension of time to
file their return. Taxpayers may elect to file
this request electronically or by mailing the
extension to the Department of Revenue on
or before the due date of the return. The
request must state a reasonable cause for
the inability to file. Inability to pay is not an
acceptable reason. Acceptable reasons
include, but are not limited to, destruction of
records by fire or flood and serious illness
of the taxpayer. Extensions are limited
to six months. A copy of the Kentucky
extension request must be enclosed
with your paper return. If you file your
return electronically, you must indicate
that an extension was filed by checking
the appropriate box in the software.
Individuals who receive a federal extension
are not required to request a separate
Kentucky extension. They can meet the
requirements by enclosing a copy of the
application for automatic federal extension
to the Kentucky return.

5

IRS extensions by e-file (by personal
computer or a tax professional)—
Enclose a copy of Form 4868 with the
confirmation number in the
lower right–hand corner of
the form or a copy of the
electronic acknowledgment.
Military Personnel—Kentucky residents
who are in the military are often granted
extensions for tax filings when serving
outside the United States. Any extension
granted for federal income tax purposes
will be honored for Kentucky income tax
purposes.
Combat Zone Extension—Members
of the Army, Navy, Marines, Air Force,
or Public Health Service of the United
States government who serve in an
area designated as a combat zone by
presidential proclamation shall not be
required to file an income tax return and
pay the taxes, which would otherwise
become due during the period of service,
until 12 months after the service is
completed. Members of the National
Guard or any branch of the Reserves
called to active duty to serve in a combat
zone are granted the same extension.
Interest and Penalties—Interest at the
“tax interest rate” applies to any income tax
paid after the original due date of the return.
If the amount of tax paid by the original due
date is less than 75 percent of the tax due,
a late payment penalty may be assessed
(minimum penalty is $10).
Interest and penalty charges can be
avoided or reduced by sending payment
with your extension request by the due
date. If you wish to make a payment prior to
the due date of your return when using the:
(1)	 Kentucky Extension—Complete
Section II, Kentucky Extension
Payment Voucher, of the Application
for Extension of Time to File, Form
740EXT, and send with payment. Write
“KY Income Tax—2023” and your
Social Security number(s) on the face
of the check.
(2)	 Federal Automatic Extension—Make a
copy of the lower portion of the federal
Application for Automatic Extension,
Form 4868, and send with payment.
Make check payable to Kentucky State
Treasurer, write “KY Income Tax–2023”
and your Social Security number on
the face of the check. Enclose the
check, Federal extension and send
to Kentucky Department of Revenue,
Frankfort KY 40620-0009.

Personal Property
Forms
Ke n t u c k y b u s i n e s s t a x p aye r s a r e
reminded to report all taxable personal
property, except motor vehicles, owned
on Januar y 1 to either the proper ty
valuation administrator in the county of
residence (or location of business) or the
Office of Property Valuation in Frankfort.
Tangible personal property
is to be repor ted on the
Tangible Personal Property
Tax Return, Form 62A500.
The due date for this return is May 15.
Do not mail this return with your income
tax return; use a separate envelope.



Kentucky State
Treasury—Unclaimed
Property
Individuals—The Kentucky State Treasury
may be holding unclaimed property for
you or your family. The Treasury holds
hundreds of millions of dollars from bank
accounts, payroll checks, life insurance,
utility deposits, and other types of property
that have been unclaimed by the owners.
Please visit treasury.ky.gov or www.
missingmoney.com for more information
on how to locate and claim any funds that
may belong to you.
Businesses—Kentucky businesses are
required to comply with the Kentucky
Revised Uniform Unclaimed Property Act,
codified as KRS Chapter 393A. If you have
uncashed vendor checks, payroll checks,
unclaimed customer deposits or refunds,
or other types of property belonging to
third–parties, you may be required to turn
the property over to the Kentucky State
Treasury. Please review KRS Chapter
393A, or visit treasury.ky.gov for more
information.

6

42A740-NP(I)
10-23

INSTRUCTIONS FOR 2023 KENTUCKY FORM 740-NP
NONRESIDENT OR PART–YEAR RESIDENT INCOME TAX RETURN

WHO MUST FILE FORM 740-NP—Form 740-NP must be used by
full-year nonresidents who had income from Kentucky sources and
by part-year residents who had income while a Kentucky resident
or from Kentucky sources while a nonresident. These persons
must file Form 740-NP if they had (1) any gross income from
Kentucky sources and gross income from all sources in excess
of modified gross income for their family size, or (2) Kentucky gross
receipts from self–employment in excess of modified gross income
for their family size. See Chart A on page 10.

reserve components of the Armed Forces of the United States,
and members of the National Guard will be exempt from Kentucky
income tax. (KRS 141.019(l))
Soldiers will claim the exemption by excluding military pay when
filing a Kentucky individual income tax return starting with the 2010
return. Provided the military member has no income other than
military pay, he or she would not be required to file a Kentucky
income tax return. The military pay exemption applies to all
Kentucky military members regardless of where the member is
stationed. Kentucky income tax should no longer be withheld
from checks received for military pay, beginning January 1, 2010.
If Kentucky income tax is incorrectly withheld from a soldier’s
military pay in 2010 and after, the Department of Revenue will
refund the tax withheld.

Individuals who maintain a permanent residence in Kentucky (i.e.,
are domiciled in Kentucky) for the entire tax year are considered
full-year residents and must use Form 740. Persons not domiciled
in Kentucky but who live in Kentucky for more than 183 days during
the tax year are also considered residents; however, since they
are not full-year residents they must use Form 740-NP. Individuals
who established or abandoned Kentucky residency are considered
part-year residents.

Military Spouse—Effective for tax years beginning 2018 and
after, the Veterans Benefits and Transition Act allows the same tax
benefits, permitted to military personnel under the Servicemembers
Civil Relief Act (SCRA) to also apply to a military spouse’s
nonmilitary service income under certain circumstances. This new
law expands those rights originally granted to military spouses
beginning tax year 2009 under the Military Spouse Residency
Relief Act (MSRRA), by now allowing military spouses to choose
the same state of legal residence as their servicemember for tax
purposes, regardless of whether the military spouse has ever
lived in that state.

Persons moving into Kentucky must report income received
from Kentucky sources prior to becoming residents and income
received from all sources after becoming Kentucky residents.
Residents moving out of Kentucky during the year must report
income from all sources while a resident and from Kentucky
sources while a nonresident.
Full-year nonresidents must report all income from Kentucky
sources (including distributive share income, Schedule K-1),
from activities carried on in Kentucky or from the performance
of services in Kentucky, and from property located in Kentucky.

A military spouse’s income is not taxable to Kentucky if all of these
requirements are met:

Reciprocal States—Kentucky has reciprocal agreements with
specific states. These agreements provide for taxpayers to be
taxed by their state of residence, and not the state where income
is earned. Reciprocity does not apply to persons who live in
Kentucky for more than 183 days during the tax year. The states
and types of exemptions are as follows:
	

Illinois, West Virginia—wages and salaries

	

Indiana—wages, salaries and commissions

Ohio—wages and salaries. Note: Wages which an S corporation
pays to a shareholder-employee if the shareholder-employee
is a “twenty (20) percent or greater” direct or indirect equity
investor in the S corporation shall not be exempt under the
reciprocity agreement.

	

Virginia—commuting daily, salaries and wages

the active duty servicemember is present in Kentucky in
compliance with military orders;

•	

the military spouse is in Kentucky solely to be with the active
duty servicemember; and

•	

the active duty servicemember maintains legal residence in
a state other than Kentucky and the military spouse chooses
to claim that same state as his/her state of legal residence,
too.

If the servicemember’s spouse qualifies for military spouse relief
but his or her employer withholds income tax, he or she should
file Form 740-NP Kentucky Individual Income Tax Nonresident or
Part-Year Resident Return to request a refund of Kentucky income
tax withheld. Please check the box labeled “Military Spouse”. Your
income will not be reported as taxable on the Kentucky income
tax return. A military spouse who meets all of the requirements
for his/her income to not be taxable to Kentucky should file a new
Form K-4 with his or her employer to claim the exemption from
withholding of Kentucky income tax for future years.

	 Michigan, Wisconsin—income from personal services
		 (including salaries and wages)
	

•	

Taxpayers who qualify for this exemption and have no other
Kentucky taxable income should file Form 740-NP-R, Kentucky
Income Tax Return, Nonresident–Reciprocal State, to obtain a
refund. Also, nonresidents who qualify for the exemption should
file Form 42A809, Certificate of Nonresidence, with their employer
to exempt their future wages from Kentucky withholding.

Military Personnel Eligible for Combat Zone Extension—
Members of the Army, Navy, Marines, Air Force, or Public Health
Service of the United States government who serve in an area
designated as a combat zone by presidential proclamation shall not
be required to file an income tax return and pay the taxes, which
would otherwise become due during the period of service, until 12
months after the service is completed. Members of the National
Guard or any branch of the Reserves called to active duty to serve
in a combat zone are granted the same extension.

Gambling income and distributive share income (Schedule
K-1) are not exempt under reciprocal agreements. This
income is fully taxable. A complete return must be filed if filing
requirements are met.
Military Personnel—Nonresident military personnel with civilian
jobs in Kentucky are required to report this income on Form 740-NP
except residents of reciprocal states (see reciprocal states above).
Any income from nonmilitary Kentucky sources is also taxable.
Military Pay Exclusion—Effective for taxable years beginning on
or after January 1, 2010, all military pay received by active duty
members of the Armed Forces of the United States, members of
7

MODIFIED GROSS INCOME AND FAMILY SIZE
(Use With Chart A)

When filing an amended return, check the box on Form 740-NP
and enclose a detailed explanation of the changes to income,
deductions and tax. Submit a completed Kentucky return and
corrected federal schedules, if applicable. If you do not enclose
the required information, processing of your amended return
may be delayed.	

Family Size—Consists of yourself, your spouse if married and
living in the same household and qualifying children. Family size
is limited to four.
Qualifying Dependent Child—Means a qualifying child as defined
in Internal Revenue Code Section 152(c), and includes a child who
lives in the household but cannot be claimed as a dependent if the
provisions of Internal Revenue Code Section 152(e)(2) and 152(e)
(4) apply. In general, to be a taxpayer’s qualifying child, a person
must satisfy four tests:

CONFIDENTIALITY—Kentucky Revised Statute 131.190 requires
the Department of Revenue to maintain strict confidentiality of all
taxpayer records. No employee of the Department of Revenue may
divulge any information regarding the tax returns, schedules or
reports required to be filed. However, the Department of Revenue
is not prohibited from providing evidence to or testifying in any court
of law concerning official tax records.

•	 Relationship—The taxpayer’s child or stepchild (whether
by blood or adoption), foster child, sibling or stepsibling, or a
descendant of one of these.

The department may provide official information on a confidential
basis to the Internal Revenue Service or to any other governmental
agency with which it has an exchange of information agreement
whereby the department receives similar or useful information in
return.

•	 Residence—Has the same principal residence as the taxpayer
for more than half the tax year. A qualifying child is determined
without regard to the exception for children of divorced or
separated parents. Other federal exceptions apply.

REPORTING PERIODS AND ACCOUNTING PROCEDURES—
Kentucky law requires taxpayers to report income on the same
calendar or fiscal year and to use the same methods of accounting
as required for federal income tax purposes. Any federally approved
change in accounting period or methods must be reported to the
Kentucky Department of Revenue. Enclose a copy of the federal
approval.

•	 Age—Must be under the age of 19 at the end of the tax year, or
under the age of 24 if a full-time student for at least five months
of the year, or be permanently and totally disabled at any time
during the year.
•	 Support—Did not provide more than one-half of his/her own
support for the year.

Changes to federal income tax law made after the Internal Revenue
Code reference date contained in KRS 141.010(21) shall not
apply for purposes of Chapter 141 unless adopted by the General
Assembly.

Modified Gross Income—Modified gross income is the greater of
federal adjusted gross income adjusted to include interest income
derived from municipal bonds (non-Kentucky) and lump-sum
pension distributions not included in federal adjusted gross income;
or Kentucky adjusted gross income adjusted to include lump-sum
pension distributions not included in federal adjusted gross income.

POLITICAL PARTY FUND DESIGNATION—You may designate
that a portion of your taxes will be paid to either the Democratic
or Republican parties if you have a tax liability of at least $2 ($4
for married persons filing joint returns). This designation will not
increase your tax or decrease your refund. You may make this
designation by checking the applicable box. A taxpayer and spouse
may each make a designation. Persons making no designation
should check the "No Designation" box.

Chart A

	Your Modified Gross
If Your Family Size is:	Income is greater than:

	One..............................	and	 .............................	 $	14,580

FILING STATUS—Legal liabilities are affected by the choice of
filing methods. Married persons who file joint returns are jointly
and severally liable for all income taxes due for the period covered
by the return. If married, you may file separate or joint returns.

	Two..............................	 and	 .............................	$	19,720
	Three...........................	 and	 .............................	$	24,860
	

Four or More................	and	 .............................	$	30,000

Filing Status 1, Single—Use this filing status if you are unmarried,
divorced, widowed, legally separated by court decree, or if you
filed as "Head of Household" or "Qualifying Widow(er)" on your
federal return.

WHEN TO FILE—April 15, 2024, is the filing deadline for persons
reporting income for calendar year 2023. To avoid penalties and
interest, returns must be postmarked no later than April 15, 2024.

Filing Status 2, Married Filing Joint Return—Use this filing status
if you and your spouse choose to file a joint return even if one
spouse had no income. Jointly means that you and your spouse
add your incomes together and report the total on page 4, Column
B, Lines 1 through 31.

Social Security Number—You are required to provide your Social
Security number per Section 405, Title 42, of the United States
Code. This information will be used to establish your identity for
tax purposes only.

Filing Status 3, Married Filing Separate Returns—If using this
filing status, you and your spouse must file two, separate tax
forms. The taxpayer's income is reported on one tax form, the
spouse's on the other. When filing separate returns, the name and
Social Security number of each spouse must be entered on both
returns. Enter the spouse's Social Security number in the block
provided, and enter the name on page 1, line 3.

AMENDED RETURNS—If you discover that you omitted
deductions or otherwise improperly prepared your return, you may
obtain a refund by filing an amended return within four years of the
due date of the original return. You are required to file an amended
return to report omitted income.

8

DETERMINING YOUR INCOME

Line 1,  Wages, Salaries, Tips, etc.—Enter all wages, salaries,
tips, bonuses, commissions or other compensation received for
personal services from Kentucky sources while a nonresident and
from all sources while a resident of Kentucky. Do not include in
this amount any reimbursement for moving expenses included in
Kentucky wages on your wage and tax statement.

SECTION B—INCOME/ADJUSTMENTS TO INCOME
A copy of your federal income tax return and all supporting
schedules must be filed with Kentucky Form 740-NP. Please
clearly identify as "Copy."

Line 2,  Moving Expense Reimbursement—Any payments made
to you or on your behalf by any employer for moving expenses
are considered income. These payments may be included in box
1 as wages or shown separately on the wage and tax statements.
Persons who were residents of Kentucky for only part of the year
are required to report as income only part of the total reimbursement
they received. The amount which must be reported to Kentucky as
income is based on the percentage of Kentucky earned income
to total earned income. Earned income is income you received for
services you provided. It includes wages, salaries, tips, etc. It also
includes income earned from self-employment (Schedules C and
F and partnerships). Use the following worksheet to calculate the
taxable percentage of your reimbursement.

INSTRUCTIONS FOR COLUMN A
All entries in Column A should be amounts reported for federal
income tax purposes.
Depreciation—Assets Purchased After September 10, 2001
Effective for taxable years ending after September 10, 2001, an
individual that for federal income tax purposes elects to utilize
the 30 percent or the 50 percent special depreciation allowance
or the increased 179 deduction will have a different depreciation
and Section 179 deduction for Kentucky purposes than for federal
purposes. The differences will continue through the life of the
assets. There will be recapture and basis differences for Kentucky
and federal income tax purposes until the assets are sold or fully
depreciated.

Moving Expense Reimbursement Worksheet
1.	 Enter total Kentucky earned income
	 (do not include moving expense
	reimbursement)		_____________
2.	 Enter total earned income from federal
	 return (do not include moving expense
	reimbursement)		_____________
3.	 Divide line 1 by line 2. Enter result.
	 If amount is equal to or greater than
	 100%, enter 100%	
___ ___ ___. ___%

INSTRUCTIONS FOR COLUMN B
Depreciation, Section 179 Deduction and Gains/Losses From
Disposition of Assets—Important: Follow the instructions for
Reporting Depreciation and Section 179 Deduction Differences if
you have elected for federal income tax purposes to take the 30
percent or the 50 percent special depreciation allowance or the
increased Section 179 deduction for property placed in service after
September 10, 2001. A copy of the federal Form 4562 if filed
for federal income tax purposes must be submitted with Form
740-NP to verify that no adjustments are required.

Multiply your total federal reimbursement in Column A by the
percentage on line 3 of the worksheet and enter in Column B.
This is your Kentucky taxable portion of your moving expense
reimbursement.

Reporting Depreciation and Section 179 Deduction Differences
for property placed in service after September 10, 2001—Create
a Kentucky Form 4562 by entering Kentucky at the top center of
a federal Form 4562 above Depreciation and Amortization. For
property placed into service from September 10, 2001 through
December 31, 2019: In Part I, Line 1 enter the Kentucky limit of
$25,000 and in Part I, Line 3 enter the Kentucky phaseout amount
of $200,000. For property placed into service on or after January
1, 2020: in Part I, line 1, enter the Kentucky limit of $100,000 and
the phaseout threshold does not apply for purposes of determining
Kentucky depreciation. For property placed into service between
September 10, 2001 and December 31, 2019, the maximum
allowable IRC §179 deduction for Kentucky purposes is reduced
dollar–for– dollar by the amount by which the cost of qualifying
IRC §179 property placed in service during the year exceeds the
threshold. In determining the IRC §179 deduction for Kentucky
for property placed into service between September 10, 2001
and December 31, 2019, the income limitation on Line 11 should
be determined by using Kentucky net income before the IRC
§179 deduction instead of federal taxable income. In Part II,
strikethrough and ignore Line 14, Special depreciation allowance
for qualified property placed in service during the tax year. Use the
created Kentucky Form 4562 to compute Kentucky depreciation
and Section 179 deduction in accordance with the IRC in effect
on December 31, 2001. For property placed into service from
September 10, 2001 through December 31, 2019, or the IRC in
effect on December 31, 2003 for property placed into service on
or after January 1, 2020.

Line 3,  Interest—Interest income received while a Kentucky
resident must be reported, except for the following: (a) income
from bonds issued by the Commonwealth of Kentucky and its
political subdivisions; and (b) income from U.S. government bonds
or securities. Interest income from bonds issued by other states
and their political subdivisions is taxable to Kentucky and must be
included on line 3.
Line 4,  Dividends—Report dividends received while a resident of
Kentucky and the distributive share of the dividend income reflected
on the Schedule K-1.
Line 5,  Taxable Refunds, Credits or Offsets of State or Local
Income Taxes—Enter the amount of taxable local income tax
refund or credit reported on your federal return only if you received
a tax benefit in a prior year. Do not include state income tax refunds.
Line 6,  Alimony Received—Enter alimony payments received
while a Kentucky resident.
Lines 7 and 12,  Profit or (Loss) from Business or Farming—
For income taxable to Kentucky, complete and enclose federal
Schedule C for business income or federal Schedule F for farming
and Form 4562, Depreciation and Amortization. Do not adjust
wages by the federal work opportunity credit from federal Form
5884. For passive activities, see Form 8582-K. Do not include
income from the national tobacco settlement agreement. Adjust
income for the difference in allowable depreciation and report in
Column B.

Note: In determining the Section 179 deduction for Kentucky,
the income limitation on line 11 is Kentucky net income before
the Section 179 deduction, instead of federal taxable income.
Adjust federal Schedules C, E and F for the difference in allowable
depreciation and report in Column B the Kentucky income (loss)
from business, farming or rental property. Enclose Kentucky Form
4562 and, if filed, federal Form 4562.

Note: Individual owners of disregarded single member
LLCs (SMLLCs) that file on Schedules C, E, or F for federal
income tax shall file Form 725, Kentucky Single Member LLC
Individually Owned Income and LLET Return, to compute and pay
the limited liability entity tax. The individual member shall report
income or loss from the entity and determine credit in the same
manner as other pass-through entities (PTEs).
9

Line 13, Unemployment Compensation—Report unemployment
compensation received while a resident of Kentucky. You must
include any amount that was excluded on the federal Form 1040
or 1040-SR as part of the American Rescue Plan Act.

Lines 8 and 9,  Gain or (Loss) from Sale or Exchange of
Assets—Gains (losses) on sales of assets (including installment
sales) while a Kentucky resident must be reported on the Kentucky
return. Gains (losses) on sales of tangible assets located in
Kentucky must be reported regardless of state of residence.
Generally, gains (losses) on sales of intangible assets are reported
to the state of residence.

Line 14,  Taxable Social Security Benefits—Social Security
benefits are not taxable for Kentucky.
Line 15,  Gambling Winnings—Report income from lottery
winnings and gambling received while a Kentucky resident or from
Kentucky sources while a nonresident.

Determining and Reporting Differences in Gain or Loss From
Disposition of Assets—If during the year you dispose of assets
placed in service after September 10, 2001, on which the 30 percent
or the 50 percent special depreciation allowance or the increased
Section 179 deduction was taken for federal income tax purposes,
you will need to determine and report the difference in the amount
of gain or loss on the assets as follows:

Line 16,  Other Income—Report income from prizes, awards, or
any sources not listed above while a Kentucky resident or from
Kentucky sources while a nonresident.
Retirement Income (For persons moving out of Kentucky)—
Include differences in pension (3-year recovery rule) and IRA bases
received while a resident of Kentucky (also include differences on
Schedule P, Line 2).

Create a Kentucky form by entering Kentucky at the top center
of a federal Schedule D, federal Form 4797 and other applicable
federal forms. Compute Kentucky gain or loss from the disposed
assets using the Kentucky basis. Enter the Kentucky gain or loss on
the appropriate line. Enclose the created Kentucky Schedule D,
Kentucky Form 4797 and other forms or schedules to support
the deduction.

Net Operating Loss Deduction—Net operating losses generated
on or after January 1, 2018, are limited to 80% of the Kentucky
taxable income without the net operating loss, but any unused
amounts are available for carryforward indefinitely. Schedule
KNOL, Part II must be completed if you are claiming a Kentucky
net operating loss deduction.

Line 10(a),  Federally Taxable IRA Distributions, Pensions
and Annuities—Enter on Line 10(a), Column A, the total of IRA
distributions, pensions and annuities received for the entire year.
Enter on Line 10(a), Column B, the total of IRA distributions,
pensions and annuities received while a resident of Kentucky.

Note: If your net operating loss occurred in 2023, complete part I
of Kentucky Schedule KNOL to determine the amount of loss to be
carried forward in any future years. Keep a copy with your records
and enclose a copy with your return.

Line 10(b),  Pension Income Exclusion—You may exclude up to
$31,110 of pension income per taxpayer reported on line 10(a),
Column B. If Line 10(a), Column B, is more than $31,110 and
is from the federal government, Commonwealth of Kentucky or
Kentucky local governments, complete Schedule P.

Excess Business Loss Limitation—Complete Form 461-K if
your net losses from your trades or businesses are more than
$289,000 ($578,000 for married taxpayer filing jointly or married
filing separately on a combined return). Enter amount from Form
461-K, line 16. See form and instructions for additional instructions.
Please note this addition as “excess business loss.”

Line 11,  Income from Schedule E—Enter income from rents,
royalties, partnerships, estates, trusts, limited liability companies
(LLC), S corporations and REMICs. Nonresident individuals
receiving a Kentucky Schedule K-1 from a partnership, estate,
trust, LLC or S corporation must report their distributive share of
the income, gains or losses, etc., as reflected on the Schedule
K-1. Shareholders and partners should multiply their distributive
share items by the taxable percentage from Schedule K-1, Form
PTE, Line B(2).

The Kentucky excess business loss will be added to your net
operating loss (NOL) carryforward.
Artistic Charitable Contributions—A deduction is allowed for
"qualified artistic charitable contributions" of any literary, musical,
artistic or scholarly composition, letter or memorandum, or similar
property.

Part-year residents not receiving a Kentucky Schedule K-1, but
receiving a federal K-1 from a partnership, estate, trust or S
corporation, must report the same amount of distributive income,
gains or losses, etc., as reported for federal income tax purposes
from entities whose taxable years end during their period of
residence.

An amount equal to the fair market value of the property on the date
contributed is allowable as a deduction. However, the deduction is
limited to the amount of the taxpayer's Kentucky artistic adjusted
gross income for the taxable year.  This amount should be included
as a negative amount on line 16.
The following requirements for a deduction must be met:

Do not include in Column B the net income from an S corporation
subject to the franchise tax imposed under KRS 136.505 or the
capital stock tax imposed under KRS 136.300.

(a)	 The property must have been created by the personal
efforts of the taxpayer at least one year prior to the date
contributed. The creation of this property cannot be related
to the performance of duties while an officer or employee of
the United States, any state or political subdivision thereof.

Report income from real estate mortgage investment conduits
(REMICs) as follows: (1) if the REMIC is a corporation, include only
distributions of cash or property during the taxable year; or (2) if
other than a corporation, report the same amount as reported for
federal income tax purposes for the taxable year.

(b)	 A written appraisal of the fair market value of the contributed
property must be made by a qualified independent appraiser
within one year of the date of the contribution. A copy of the
appraisal must be enclosed with the tax return.

Note: Individual owners of disregarded single member
LLCs (SMLLCs) that file on Schedules C, E, or F for federal
income tax shall file Form 725, Kentucky Single Member LLC
Individually Owned Income and LLET Return, to compute and pay
the limited liability entity tax. The individual member shall report
income or loss from the entity and determine credit in the same
manner as other pass-through entities (PTEs).

(c)	 The contribution must be made to a qualified tax-exempt
organization.

10

ADJUSTMENTS TO INCOME

(Line 17, Column A). Enter in Column A, the total of student loan
interest from your federal return. Enter in Column B, the allowable
deduction with the above limitation.

KRS 141.019(1) and (2) provide that deductions are limited to
amounts allocable to income subject to taxation. If a deduction or
an adjustment to gross income is allowable based upon the receipt
of certain types of income or is limited to a maximum amount
deductible for federal income tax purposes, the Kentucky income
used to determine the amount allowable for Kentucky shall be the
same type of income used to allow the deduction on the federal
return. Persons who move into or out of Kentucky during the year
are limited to either the adjustments to gross income paid during
the period of residence or that portion of adjustments to gross
income that Kentucky income bears to total income. Nonresidents
are limited to that portion of adjustments to gross income that
Kentucky income bears to total income.

Line 29,  RESERVED
Line 30,  Archer MSA Deduction—Federal limitations apply.
Archer MSA deduction is limited to the percentage of Kentucky
total income (Line 17, Column B) to federal total income (Line 17,
Column A). Enter in Column A, the Archer MSA deduction from
your federal return. Enter in Column B, the allowable deduction
with the above limitation.
Line 31,  Other Deductions—List any other adjustments to total
income not listed above on lines 18 through 30. List the type
of deduction in the space provided. Other deductions, with the
exception of military and qualifying military spouse income, are
limited to the percentage of Kentucky total income (Line 17, Column
B) to federal total income (Line 17, Column A). Enter in Column
A, the total of any other adjustments to the total income listed on
your federal return. Enter in Column B, the allowable deduction
with the above limitation.

Line 18,  Educator Expenses—Deduct up to $300 for teachers
and other educators for their out-of-pocket expenses incurred
while a Kentucky resident or expenses for use in an educational
classroom.
Line 19,  Cer tain Business Expenses of Reser vists,
Performing Artists and Fee-Basis Government Officials—Do
not include out-of-pocket expenses for members of the National
Guard or Reserves.

Nonresident military members filing to report nonmilitary income
to Kentucky must subtract their military income on line 31, Column
A with a notation “nonresident military income.” The qualifying
spouse of a military member who has nonmilitary income should
subtract their income on line 31, Column A with a notation “military
spouse income.” Nonresident military and qualifying military
spouse income is not limited to the percentage of Kentucky total
income to federal total income.

Line 20,  Health Savings Account (HSA) Deduction—Federal
limitations apply. Contributions deducted by full-year nonresidents
are limited to the percentage of their Kentucky total income (Line
17, Column B) to their federal total income (Line 17, Column A).
Do not claim amounts as an itemized deduction.
Line 21,  Moving Expenses for Members of the Armed
Forces—Moving expenses are not deductible.

INCOME/TAX
Note: These items are reported on page 1, Form 740-NP.

Line 22,  Deduction for One-Half of Self-Employment Tax—
You may deduct one-half of the self-employment tax based upon
the self–employment income reported in Column B as Kentucky
income for the taxable year.

Line 7—Enter the percentage from page 4, line 34.
Line 8—Enter federal Adjusted Gross Income from page 4,
Column A, Line 33.

Line 23,  Self-Employed SEP, SIMPLE and Qualified Plans
Deduction—Self-employed persons may deduct qualified
payments to a Keogh retirement plan, a Simplified Employee
Pension (SEP) or a SIMPLE plan based upon Kentucky
self‑employment earnings.

Line 9—Enter Kentucky Adjusted Gross Income from page 4,
Column B, Line 33.
Line 10—Nonitemizers, enter the standard deduction of $2,980. If
filing a joint return, only one $2,980 standard deduction is allowed.

Line 24,  Self-Employed Health Insurance Deduction—Selfemployed persons may deduct self-employed health insurance
based upon Kentucky self-employment earnings.

Line 11—Itemizers, complete Schedule A and enter itemized
deductions on line 11. If one spouse itemizes deductions, the other
must itemize. See specific instructions for Schedule A.

Line 25,  Penalty on Early Withdrawal of Savings—You may
deduct the interest penalty only if the interest income has been
reported to Kentucky.

Line 12—Multiply line 11 by the percentage on line 7. If line 12 does
not exceed $2,980 and your filing status is 1 or 2, you should elect
to take the standard deduction. Married couples filing separate
returns, see special rules under instructions for Schedule A.

Line 26,  Alimony  Paid—The alimony deduction cannot exceed
Kentucky income. Alimony paid by full-year nonresidents is limited
to the percentage of their Kentucky total income to their federal
total income. Enter the recipient's name and Social Security
number.

Line 13—Subtract either line 10 or 12 from line 9. This is your
Taxable Income.
Line 14—Tax Computation: Multiply line 13 by four and one-half
percent (.045). This is your tax.

You can’t take a deduction for alimony payments you made to
or for your spouse if you entered into your divorce or separation
agreement after December 31, 2018, or if you entered into the
agreement on or before December 31, 2018, and the agreement
was changed after December 31, 2018, to expressly provide that
alimony received is not included in your former spouse’s income.

Schedule J,  Farm Income Averaging—If you elect Farm Income
Averaging on your federal return, you may also use this method
for Kentucky. Complete and enclose Kentucky Schedule J and
include tax in the amount on this line.
If you had a lump-sum distribution from a qualified retirement
plan, complete Schedule P and Form 4972-K and enclose
copies to Form 740-NP.  The amount of tax computed on Form
4972-K should be included in the amount on this line.

Line 27,  Individual Retirement Arrangements (IRAs)—
The deduction cannot exceed income earned in Kentucky.
Contributions made by full-year nonresidents are limited to the
percentage of their Kentucky earned income to their federal
earned income. Use federal worksheets and instructions with the
above limitations.

Also enter on this line any recycling composting income tax credit
recapture (enclose Schedule RC-R), distilled spirits income tax
credit recapture (enclose Schedule DS-R), and/or angel investor
income tax credit recapture.

Line 28,  Student Loan Interest Deduction—Federal limitations
apply. Student loan interest deduction is limited to the percentage of
Kentucky total income (Line 17, Column B) to federal total income

Line 15—Enter amount from Schedule ITC, Section A, Line 25.
See instructions for Schedule ITC.
11

Line 17—Enter amount from Schedule ITC, Section B. See
instructions for Schedule ITC.

Line 27,  Kentucky Use Tax—If, while a Kentucky resident, you
made any out-of-state purchases of tangible personal property,
digital property and extended warranties for use in Kentucky on
which sales tax was not charged, you must report Kentucky use
tax on those purchases, pursuant to KRS 139.330. For example,
if you order from catalogs, make purchases through the
Internet, or shop outside Kentucky for items such as clothing,
shoes, jewelry, cleaning supplies, furniture, computer equipment,
pre-written computer software, office supplies, books, souvenirs,
exercise equipment or subscribe to magazines, you may owe use
tax to Kentucky.

NOTE: Use only if 65 or over, blind, or in Kentucky National Guard.
Line 18—Multiply the amount on line 17 by the percentage on line
7 and enter result here.
Line 20 and Line 21,  Family Size Tax Credit— The Family Size
Tax Credit is based on modified gross income (MGI) and the size
of the family. If your total MGI is $39,900 or less, you may qualify
for Kentucky Family Size Tax Credit.

For your convenience, the Use Tax Calculation Worksheet and
Optional Use Tax Table are provided in these instructions. The
Optional Use Tax Table is designed for those purchases of less than
$1,000. If you made untaxed out-of-state purchases in amounts
under $1,000, but do not have records readily available that show
the amount of those purchases, you may use the Optional Use Tax
Table below to estimate the compensating use tax based on your
Kentucky Adjusted Gross Income (KYAGI). All untaxed purchases
in the amount of $1,000 or greater must be accounted for on an
actual basis using the Use Tax Calculation Worksheet. Failure to
timely report may result in assessment of penalty and interest in
addition to the tax amount due.

Enter Family Size. See Schedule ITC for instructions.
Enter Family Size Tax Credit decimal amount determined from
Family Size Tax Credit Table.
Line 23,  Education Tuition Tax Credit—Complete Form 8863-K
to claim this credit. See Forms and instructions.
Line 24,  Child and Dependent Care Credit—Full-year
nonresidents are not entitled to this credit. Part-year residents
may be entitled to a credit for child and dependent care expenses
paid while a resident of Kentucky. To determine this credit, complete
the following worksheet.

Optional  Use  Tax  Table

Note: If you and your spouse are filing separate Kentucky returns,
the child and dependent care credit calculated for Kentucky must
be divided based on the percentage of each spouse's adjusted
gross income to total Kentucky adjusted gross income (line 9).

	
KY AGI* Tax
$0 - $10,000........................................ $5	
$10,001 - $20,000............................. $15	
$20,001 - $30,000............................. $20	
$30,001 - $40,000............................. $30	
$40,001 - $50,000............................. $40
$50,001 - $75,000............................. $60
$75,001 - $100,000........................... $80
Above $100,000................................ Multiply AGI by
	
0.08% (0.0008)

Child and Dependent Care Credit
Worksheet
(a)	Enter total credit calculated
	
on federal Form 2441, line 11...........________________
(b)	Enter total child and dependent
	 care expenses entered on
	 Form 2441, line 3...............................________________

* AGI from line 9 on KY Form 740 or KY Form 740-NP.

Use Tax Calculation Worksheet

(c)	 Enter the amount included on
	 line (b) paid while a Kentucky
	resident..............................................________________
(d)	Divide line (c) by line (b).
	 Enter result........................................	

Call 502-564-5170 for assistance.
1.	 Purchases