Louisville local tax guide
Who pays Louisville's local tax
The tax follows the job site, with one twist for residents. Everyone who works inside Jefferson County pays the Metro and transit shares, which together make up the 1.45% nonresident rate. Jefferson County residents also pay the school board share, which lifts them to 2.2%. A Louisville resident whose job is in Oldham or Bullitt County owes Louisville Metro nothing on that pay. People who work from a home office in Jefferson County owe the tax on that work even when the employer is out of state.
Three taxes collected as one
The Louisville Metro Revenue Commission collects the occupational license tax for Louisville Metro Government, the Transit Authority of River City (TARC), and the Jefferson County Board of Education. For residents of the small Anchorage Independent school district, the school share goes to the Anchorage board instead. You see one local line on your pay stub, but the money is split among those bodies.
Because Louisville and Jefferson County merged their governments in 2003, the Metro rate already does the job a county occupational tax does elsewhere in Kentucky. Workers in Covington, Florence, or Bowling Green face a separate county payroll tax on top of the city rate; in Louisville there is no second county layer to add.
The tax applies to gross wages from the first dollar, with no standard deduction or exemption, so a resident earning $40,000 already pays $880 a year locally.
Worked example: $75,000 in Louisville
Take a single filer earning $75,000 who lives and works in Louisville. Federal income tax is $7,670, Social Security $4,650, and Medicare $1,088. Kentucky's flat 3.5% applies after the $3,360 standard deduction, which comes to $2,507. The 2.2% Metro rate adds $1,650, so take-home pay is $57,435 a year, or $4,786 a month.
Move that same paycheck to a worker who lives in Oldham County and drives in each day. The 1.45% commuter rate costs $1,088, leaving $57,998, so the commuter keeps $562 more than the Louisville resident. A Kentucky paycheck with no local tax at all would leave $59,085, which puts the resident rate's cost at $1,650 a year, or roughly $63 per biweekly check.
The gap grows with pay. At $100,000 a resident pays $2,200 and a commuter $1,450; at $150,000 the figures are $3,300 and $2,175. See the Kentucky $75,000 salary breakdown for the state-only version of these numbers.
Withholding, Indiana commuters, and remote work
Employers with staff in Jefferson County register with the Revenue Commission and withhold the tax every payday, choosing the resident or nonresident rate from the home address on file. If you move into or out of the county, tell payroll, since the move changes which of the two rates applies.
Many Louisville workers live across the Ohio River in Clark and Floyd counties, Indiana. Kentucky and Indiana have a reciprocity agreement, so an Indiana resident can give a Louisville employer Form 42A809 to stop Kentucky state withholding and pay state tax at home. The agreement does not reach the Metro tax: the 1.45% nonresident rate still comes out of every check.
If your employer is based elsewhere and does not withhold the Metro tax on work you do from home in Jefferson County, you are responsible for filing and paying it directly with the Revenue Commission. Kentucky state withholding is a separate matter set by Form K-4.
How Louisville compares with other Kentucky cities
Louisville's 2.2% resident rate sits in the middle of the cities we cover. Lexington residents pay 2.75% ($2,063 at $75,000), Ashland charges 2.5% ($1,875), and Covington 2.45% ($1,838). Bowling Green, Paducah, and several smaller cities charge 2% ($1,500), and Henderson's 1.65% costs $1,238.
For commuters, Louisville is the cheapest big job market in the state: its 1.45% nonresident rate is lower than any flat city rate on our list, and no county tax is stacked on top. Lexington charges commuters 2.25%, so compare the Lexington calculator if you are weighing jobs in both cities.
Tips for Louisville paychecks
Update payroll when you cross the county line
A move between Jefferson County and a neighboring county switches you between the 2.2% and 1.45% rates. Give your employer the new address so the right rate is withheld.
Indiana residents: file Form 42A809
Living in Jeffersonville or New Albany and working in Louisville, hand your employer Kentucky's certificate of nonresidence so only Indiana state tax is withheld. Expect the Metro tax to stay on your stub.
Check remote-work withholding
Out-of-state employers often skip the Metro tax for staff working from Louisville homes. Look for a local line on your pay stub; if it is missing, plan to file and pay the Revenue Commission yourself.
Price the commute against the rate
At $75,000, living outside Jefferson County saves $562 a year in local tax. Weigh that against longer drives and any taxes your new county charges on work done there.