On April 13, 2018, Ken­tucky leg­is­la­tion passed a new tax bill into law. Instead of read­ing the thou­sands of pages of the new tax law, which I know many of you enjoy dear­ly, I thought a sum­ma­ry of some of the main high­lights would be use­ful. This does not include every sin­gle change in the tax law and is only intend­ed to sum­ma­rize the changes that will have a wider impact.

Sales tax changes effec­tive July 1, 2018:

  • New­ly taxed ser­vices include land­scap­ing, jan­i­to­r­i­al, vet­eri­nar­i­an ser­vices for small ani­mals, fit­ness and recre­ation­al sports cen­ters, com­mer­cial laun­dries, golf cours­es and coun­try clubs, dry clean­ing, pet groom­ing, weight loss cen­ters and camp­grounds and others.
  • Ser­vices and changes to install, repair and main­tain tan­gi­ble prop­er­ty used in man­u­fac­tur­ing and indus­tri­al pro­cess­ing are exempt from taxation.
  • Mod­i­fi­ca­tions and enhance­ments to prewrit­ten com­put­er soft­ware have been clar­i­fied as not tax­able where­as pre-writ­ten com­put­er soft­ware is taxable.

Cor­po­rate income tax rate:

  • A flat 5% tax rate is used instead of a tiered rate that was capped at 6%. Cor­po­ra­tions that were taxed below the 5% per­cent rate in the past will see a tax increase where­as cor­po­ra­tions taxed at the 6% tax rate in the past will see a tax decrease.
  • The Ken­tucky Domes­tic Pro­duc­tion Activ­i­ties Deduc­tion has been removed to match the fed­er­al removal of the deduction.

Indi­vid­ual income tax rate:

  • The fed­er­al 20% deduc­tion for pass-through enti­ties under Sec­tion 199A is dis­al­lowed at the state level.
  • New­ly dis­al­lowed item­ized deduc­tions include med­ical expens­es, tax­es paid and casu­al­ty and theft loss­es. Mort­gage inter­est deduc­tions and char­i­ta­ble con­tri­bu­tions are still allowed.
  • Effec­tive July 1, 2018, the tax rate will be reduced from an aver­age of 5.8% to 5% for every­one from the tiered brack­et that capped at 6%.

As always, if you have any ques­tions regard­ing any of these changes, feel free to reach out to any of us at Mack­ey Advi­sors 859) 331‑7755.