It’s crucial to comprehend the applicable sales tax rate while buying a car in Kentucky. The state charges a minimum tax of $15 and a 6% sales tax on the cost of a vehicle. In addition, the county clerk’s office is responsible for collecting a 6% usage tax on the vehicle’s worth when it is registered for the first time in Kentucky.
It is crucial to remember that this sales tax is calculated based on the total cost of the vehicle, including any applied trade-in value or rebates. In addition, even if the car was bought out-of-state, the buyer is still liable for the usage tax when the car is registered in Kentucky.
Kentucky’s 6% car sales tax is about average when compared to other states. The states with the highest sales tax rates are Tennessee and Arkansas, both of which have a combined rate of 9.5% when looking at the overall sales tax rate (including state and local taxes). Oregon, on the other hand, is the state with the lowest sales tax rate because it has no sales tax.
Capital gains tax is another tax issue that Kentucky citizens should be aware of. Despite the absence of a specific capital gains tax in Kentucky, capital gains are nevertheless subject to the state’s income tax, which has a range of 2% to 5%. However, there are tactics you may use to potentially avoid or reduce capital gains tax, like using tax-deferred funds like 401(k)s or IRAs, or harvesting your tax losses.
In conclusion, it’s critical to comprehend Kentucky’s automobile sales tax before buying a new or used car there. Even though the 6% tax rate may be average, it’s crucial to take the state’s overall sales tax rate into account when comparing to other states. Additionally, Kentucky citizens can reduce their tax obligations by being aware of potential tax implications for capital gains and retirement income.
Personal protective equipment (PPE) is often free from sales tax in Kentucky. However, if they are not especially made for industrial or occupational usage, some PPE items, such as hard hats and safety shoes or boots, may be subject to sales tax. It is always advised to seek particular advice on the taxability of PPE from a tax expert or the Kentucky Department of Revenue.