Kentucky Inheritance Tax: Rates and Exemptions

Kentucky has no estate tax, and its inheritance tax exempts a spouse, children, parents, grandchildren, and siblings.1

For a death on or after January 1, 2026, a niece or nephew pays no Kentucky inheritance tax either: Kentucky moved them into the exempt class that year.1 The Kentucky inheritance tax still reaches further out, to aunts and uncles, sons-in-law and daughters-in-law, great-grandchildren, cousins, and friends, and even then each heir gets a small exemption first.1

In This Guide

• Kentucky Inheritance Tax at a Glance
• The 2026 Change: Nieces and Nephews
• Kentucky Has an Inheritance Tax, Not an Estate Tax
• How the Kentucky Inheritance Tax Works
• Which Kentucky Inheritance Tax Class Is Each Heir In?
• Next Steps
• Frequently Asked Questions

Kentucky Inheritance Tax at a Glance

Kentucky does not tax your estate. It taxes certain people who inherit from you, and what each one owes depends on their relationship to you and on the value of what they inherit.1

The exempt circle reaches past the nuclear family, and in 2026 it got wider. Kentucky folds siblings, including half-brothers and half-sisters, into its fully exempt Class A, and for a death on or after January 1, 2026 it folds nieces and nephews in as well.1 So for a 2026 death, a spouse, children, parents, grandchildren, siblings, and nieces and nephews all inherit free of Kentucky inheritance tax.

The tax only kicks in for heirs outside that circle, and each of them gets a small exemption first.1

One line in that circle catches people out. Grandchildren are Class A, but great-grandchildren are not. They sit in Class B.1 Check the class of every heir by name rather than by how close they feel on the family tree.

The 2026 Change: Nieces and Nephews

Kentucky moved nieces and nephews out of Class B and into the fully exempt Class A. The change came in 2026 Ky. Acts ch. 198, sec. 40, which took effect April 27, 2026 and applies to estates of decedents who died on or after January 1, 2026.1

Which rule governs turns on the date of death, not on the date the estate is settled:

• Death on or after January 1, 2026. A niece or nephew, including a niece or nephew of the half blood, is a Class A beneficiary and pays no Kentucky inheritance tax at all, with no dollar ceiling on the exemption.1
• Death before January 1, 2026. A niece, nephew, half-niece, or half-nephew was a Class B beneficiary: a $1,000 exemption, then 4 to 16 percent.1

So a niece who inherits $200,000 from an aunt who died in 2026 is a Class A beneficiary and owes Kentucky nothing on it.1 The same niece inheriting the same $200,000 from an aunt who died in 2025 is in Class B, with a $1,000 exemption and a 4 to 16 percent rate.1 That rate steps up band by band with the value inherited, on the Class B schedule set out below.1 An estate from a 2025 death goes by the older class list, so check the date before you rely on either one.

The inheritance amount above is a hypothetical, used only to show how the two rules differ.

Kentucky Has an Inheritance Tax, Not an Estate Tax

These two get confused constantly. Kentucky's inheritance tax is a tax on what each beneficiary receives. The amount depends on the beneficiary's relationship to the person who died and on the value of the property.1 Two people inheriting equal amounts from the same estate can owe very different tax, because one was a child and the other was a cousin.

Kentucky has no estate tax, and has not had one since January 1, 2005.1

The federal estate tax is a separate tax from Kentucky's inheritance tax.1 It is figured on the total of what a person transfers during life and at death. For deaths in 2026 its basic exclusion amount is $15,000,000 per decedent, and taxable gifts made during life count against that amount.2 Being under the federal exclusion does not settle the Kentucky question, because a state inheritance tax can fall on an estate that owes nothing federally.2 So check the Kentucky inheritance tax on its own, whatever the federal answer is.

How the Kentucky Inheritance Tax Works

The tax sorts every beneficiary into one of three classes, and the class sets both the exemption and the rate.1

Class A pays nothing. Class B gets a $1,000 exemption, then pays 4 to 16 percent. Class C gets a $500 exemption, then pays 6 to 16 percent.1 The table in the next section places each relationship in its class.

Those percentages are the bottom and top of each range, not a flat rate. The amount a Class B or Class C heir owes also depends on the value of the property that heir receives.1 KRS 140.070 sets the rate band by band.1

Both schedules are subject to the exemptions in KRS 140.080, and under that statute the exemptions are chargeable against the lowest bracket or brackets.1 This guide stops at the schedule and does not compute a bill. Have whoever prepares the return work out the figure for each taxable heir.

The Class A exemption applies where the date of death is after June 30, 1998.1 When every beneficiary is Class A, none of them owes Kentucky inheritance tax.1

Who files. The Kentucky Department of Revenue says the estate's personal representative has to file a return only when any part of the estate passes to taxable beneficiaries, or when federal Form 706, the U.S. Estate (and Generation-Skipping Transfer) Tax Return, is required.1

When the return is due. If taxes are due, the return must be filed within 18 months from the date of death. If the tax is not paid within 18 months of death, interest and perhaps penalties are due.1

When to pay. The tax due should be paid when the return is filed, and a 5 percent discount is allowed if it is paid within nine months of the date of death.1 There is one alternative to paying in full at filing. If a beneficiary's net inheritance tax liability exceeds $5,000 and the return is filed on time, an election can be made to pay the tax in 10 equal annual installments. The first installment is due when the return is filed, and the deferred portion is charged interest, at the rate established by law, beginning 18 months after the date of death.1

When no one owes. If all taxable assets pass to exempt beneficiaries and Form 706 is not required, the Department says the court will accept an Affidavit of Exemption for final settlement and closing of the estate's administration. In that case it is not necessary to file a No Tax Due Inheritance Tax Return with the Department, and a copy of the affidavit should not be sent to the Department.1 In the affidavit, the person signing states that all assets of the estate pass to beneficiaries exempt under KRS 140.080 or to organizations exempt under KRS 140.060.1 If a niece or nephew is among the heirs of a 2026 death, confirm with the estate's attorney before relying on the affidavit, because the Department's posted class lists predate the 2026 change.

The forms. The Kentucky Department of Revenue's inheritance tax page lists the Inheritance Tax Return long form (92A200), the Inheritance Tax Return - No Tax Due (92A201), the Inheritance Tax Return - Short Form (92A205), and the Affidavit of Exemption (92A300).1 A copy of the Affidavit of Exemption and the tax returns can be obtained from the Financial Tax Section, Kentucky Department of Revenue, Station 61, 501 High Street, Frankfort, Kentucky 40601-2103, or by calling (502) 564-4810.1

Which Kentucky Inheritance Tax Class Is Each Heir In?

Every Class A row in that table reads the same way: a full exemption and no tax to pay, however large the inheritance.1 The niece and nephew rows depend on the date of death.

Siblings are exempt. A brother or sister pays no Kentucky inheritance tax, in the same Class A as a spouse and children.1 Half-brothers and half-sisters sit in Class A as well, so they are exempt on the same terms.

Stepchildren and adopted children are spelled out in the statute. Under KRS 140.070, Class A covers a child by blood, a stepchild, a child adopted during infancy, and a child adopted during adulthood who was reared by the decedent during infancy. A grandchild in Class A is the issue of any of those four. Class B's great-grandchild is the grandchild of a child by blood, of a stepchild, or of a child adopted during infancy.1 If an adoption does not fit one of those descriptions, ask the estate's attorney which class applies.

Nieces and nephews turn on the date of death. They are Class A for a death on or after January 1, 2026 and were Class B for a death before it, so check the date before you assume either answer.1

Class B starts at 4 percent. Sons- and daughters-in-law, aunts, uncles, and great-grandchildren receive a $1,000 exemption, and the rate is 4 to 16 percent.1 For a death before January 1, 2026, nieces and nephews were taxed on these terms too.1

Class C starts at 6 percent. Class C is everyone not in Class A or Class B: cousins, nieces and nephews by marriage, great-nieces and great-nephews, and unrelated beneficiaries such as friends. They receive a $500 exemption, and the rate is 6 to 16 percent.1 Note which way the "by marriage" versions go: a niece by marriage is Class C, while a niece by blood is Class A for a 2026 death and was Class B for an earlier one.

Class C is not only individuals. Educational, religious, or other institutions, societies or associations, and public institutions are listed in Class C as well, to the extent KRS 140.060 does not exempt them.1 So a bequest to a church, a school, or a charity is not automatically free of Kentucky inheritance tax. Whether it is exempt turns on that statute, which is worth checking before the will is drafted rather than after.

A small bequest can fall inside the exemption. Class B beneficiaries receive a $1,000 exemption and Class C beneficiaries a $500 exemption.1 As a hypothetical, an aunt left $900 or a friend left $400 would be under the exemption for their class.

When everything passes to a spouse, children, or siblings, the inheritance tax never comes into play, and for a 2026 death a gift to a niece or nephew does not bring it in either.1 It is the gifts to sons-in-law and daughters-in-law, aunts and uncles, great-grandchildren, more distant relatives, and friends that get taxed.

Next Steps

The planning lesson in Kentucky is reassuring, and it got a little more so in 2026: leaving assets to close family, including siblings and now nieces and nephews, keeps the inheritance tax out of the picture entirely.1

• Check whether any heir falls outside Class A, and check the date of death. Gifts to aunts, uncles, sons-in-law, daughters-in-law, great-grandchildren, cousins, or friends are what trigger the tax, and for a death before January 1, 2026 gifts to nieces and nephews did too. Check each heir by their actual relationship, not by how close they feel.
• Get the bill worked out for any heir outside Class A. What that heir owes depends on their class and on the value of what they receive.1 The rate schedules above show the bands, and a Kentucky estate attorney can work out the figure. If taxes are due, the return must be filed within 18 months from the date of death, and a 5 percent discount is allowed for tax paid within nine months.1 Return forms can be obtained from the Department of Revenue's Financial Tax Section by calling (502) 564-4810.1
• If Medicaid paid for care, read up on estate recovery as well. This guide covers the Kentucky inheritance tax only. Our Medicaid estate recovery guide covers the other.

For families weighing how an inheritance fits into paying for a parent's care, our guides on building a senior care funding plan and selling or renting a home for care walk through the money side in plain terms.

Learn More

Find personalized help understanding how an inheritance affects your family's care plan at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.