Is the occupational tax based on where I live or where I work?

In Kentucky, occupational tax is generally based on where you work and where your business activity occurs, not where you live. Some people may be subject to more than one jurisdiction if they work in multiple locations; you should check each local ordinance and your employer’s payroll setup.

Are Kentucky occupational tax rates the same everywhere?

No. Each city or county that imposes an occupational tax sets its own rate, which may be a percentage of wages, a flat amount, or a combination. Some jurisdictions also have different rates for employees and for business net profits. Always confirm the current rate with the local government or their official forms.

Kentucky Occupational Tax Calculator

Estimate Kentucky local occupational tax (occupational license fee) withholding and net pay by city or county. Supports percentage and flat-rate taxes, pre-tax deductions, and employer cost.

Pay frequency

Gross pay amount

Enter your pay before any taxes or deductions for the selected period.

Jurisdiction (example presets)

Preset rates are illustrative only and may not match current law. Always confirm the official rate and rules with the relevant Kentucky city or county.

Tax type

Percentage of taxable wages Flat amount per period

Occupational tax rate

Enter the local occupational tax percentage (for example, 2.25 for 2.25%).

Adjustments & deductions (optional)

Pre-tax deductions that reduce occupational taxable wages

Example: pre-tax retirement contributions or health premiums if your local ordinance excludes them.

Other local wage-based taxes (for comparison only)

Optional: add another local percentage tax (e.g., school or transit tax) to see its impact on total local withholding.

Results

Employee view

Gross pay (per period): $2,000.00
Pre-tax deductions: $0.00
Taxable wages for occupational tax: $2,000.00
Kentucky occupational tax: $45.00
Other local wage-based tax: $0.00
Net pay after local taxes: $1,955.00
Effective occupational tax rate: 2.25%

Annualized summary

Estimated annual gross pay: $52,000.00
Annual Kentucky occupational tax: $1,170.00
Annual other local tax: $0.00
Total annual local wage-based taxes: $1,170.00

Annual amounts are estimates based on your selected pay frequency and assume the same pay and tax rate all year.

How this Kentucky occupational tax calculator works

Many Kentucky cities and counties impose an occupational tax (also called an occupational license fee) on wages and business net profits earned within their jurisdiction. This calculator focuses on the wage-based occupational tax that is typically withheld from employee paychecks.

Basic formula (percentage-based occupational tax)

Let:

GrossPay = your pay for the period before any taxes
PreTax = pre-tax deductions that your local ordinance excludes from taxable wages
Rate = occupational tax rate (as a decimal, e.g., 2.25% → 0.0225)

Then taxable wages and occupational tax are:

TaxableWages = max(0, GrossPay − PreTax)
OccupationalTax = TaxableWages × Rate

Flat-amount occupational tax

Some jurisdictions charge a flat dollar amount per period instead of, or in addition to, a percentage. In that case:

OccupationalTax = FlatAmountPerPeriod

This tool lets you choose either method and optionally add another local wage-based tax (for example, a school or transit tax) to see the combined impact on your net pay.

Pay frequency & annualization

To show annual estimates, the calculator multiplies your per-period values by a standard number of periods:

Hourly: assumes 2,080 hours per year (40 hours × 52 weeks)
Weekly: 52 pay periods per year
Biweekly: 26 pay periods per year
Semimonthly: 24 pay periods per year
Monthly: 12 pay periods per year
Annual: 1 period per year (you enter the annual amount directly)

Actual annual totals may differ if your hours, pay, or tax rates change during the year.

Important notes and limitations

This is an educational estimator, not an official filing tool.
Kentucky occupational tax rules vary by jurisdiction. Some have:
- Different rates for wages vs. net profits
- Caps, minimums, or exemptions
- Special treatment for certain benefits or deductions
The preset rates in the dropdown are examples only and may not reflect current law. Always verify with the city or county’s official website, forms, or ordinances.
This calculator does not compute Kentucky state income tax or federal income tax. It only estimates local occupational and optional other local wage-based taxes.

Tips for employees

Check your pay stub to see the exact description and rate of any occupational tax withheld.
Confirm whether your retirement contributions or health premiums reduce occupational taxable wages.
If you work in multiple Kentucky jurisdictions, you may owe tax to more than one locality.
When in doubt, contact your employer’s payroll department or the local tax administrator.

Tips for employers & payroll admins

Use this tool to sanity-check per-pay-period withholding for a given wage and rate.
Maintain an up-to-date table of local occupational tax rates and filing requirements.
Review local ordinances for:
- What counts as taxable compensation
- Any wage caps or thresholds
- Filing frequencies and due dates
Coordinate with your payroll software vendor to ensure correct jurisdiction mapping and rates.

Disclaimer

This calculator is provided for informational and educational purposes only and does not constitute tax, legal, or payroll advice. Occupational tax laws can change and may be interpreted differently by each jurisdiction. You are responsible for verifying all rates and calculations with the appropriate Kentucky city or county and for complying with all filing and payment requirements.

Frequently asked questions about Kentucky occupational tax

What is the Kentucky occupational tax?

The Kentucky occupational tax (often called an occupational license fee) is a local tax imposed by many Kentucky cities and counties on wages, salaries, and net profits from business activity within their jurisdiction. It is separate from Kentucky state income tax and federal income tax.

Who has to pay Kentucky occupational tax?

Employees who work in a jurisdiction that levies an occupational tax usually have the tax withheld from their paycheck by their employer. Businesses, self‑employed individuals, and independent contractors may also owe occupational tax on net profits and must file returns directly with the local tax office.

Is the tax based on where I live or where I work?

Occupational tax is generally based on where you work and where your business activity occurs, not where you live. If you work in multiple jurisdictions, you may be subject to more than one occupational tax and should review each local ordinance carefully.

Are the same rates used everywhere in Kentucky?

No. Each city or county that imposes an occupational tax sets its own rate and rules. Some use a simple percentage of wages, others may have flat fees, caps, or special rules for certain types of income. Always check the official website or forms for the specific jurisdiction.

Does this calculator file my occupational tax return?

No. This tool only provides an estimate of local occupational tax and net pay. To file or pay occupational tax, you must use the official forms and payment methods provided by the relevant Kentucky city or county or by their occupational tax administrator.