Kentucky School District Occupational License Tax: 0.5% Cap, HB 757 Freeze After January 1, 2027 and Which Districts Levy It
Kentucky School District Occupational License Tax: 0.5% Cap, HB 757 Freeze After January 1, 2027 and Which Districts Levy It
If you run a business in Kentucky, you probably already know about the city or county occupational license tax. The kentucky school district occupational tax is a separate local levy that many owners miss. School districts set it, not city councils, and it can appear as its own line on a payroll or net profits return, or as part of a larger rate that a city publishes. This guide covers the current cap, what HB 757 changed, which districts have reported a school tax, and how to confirm the rate for your location.
This is informational content, not legal or tax advice. Rates and rules change. Confirm your obligations with the named agency and with a qualified CPA or attorney before you register, withhold or file.
What the School District Occupational Tax Is
Kentucky has 120 counties and about 420 cities. Cities, counties and school districts can each levy local occupational license taxes on payroll, net profits or gross receipts. These local taxes are the part of your tax picture that varies most by address, and they are separate from the state's own tax obligations.
Kentucky has no statewide general business license. Registering an entity or an assumed name is a filing with the Secretary of State, not a license. Kentucky also has a flat 6% state sales tax with no local sales taxes added on top of it, but the sales tax reaches about 50 services, so it is worth checking separately if you sell services.
The school district tax is governed by KRS 160.607. Under that section, a school district levies its tax at one uniform rate that cannot be above 0.5%.
The 0.5% Cap and the Jefferson County Allowance That Ended
Before 2026, counties of 500,000 or more, which in practice means Jefferson County, could levy an extra 0.25% for schools. That extra allowance ended on April 14, 2026, the effective date of HB 757 (2026 Acts ch. 161, sec. 77). After that date, the school tax in any district is capped at one uniform rate not above 0.5%.
The practical result is simple: if you see a school share above 0.5% in an older table, a website or a payroll template, treat it as out of date and check the current district notice before you withhold anything.
The HB 757 Freeze After January 1, 2027
HB 757 also sets a freeze date. On and after January 1, 2027:
- A school district that does not already levy the tax cannot start one.
- A school district that levies the tax cannot raise its rate.
For a business, this means the school share you see in a district today is the ceiling for that district after the freeze date, under current law. Boards can still act before January 1, 2027, so look for any notice dated late 2026 and confirm its effective date. If you are choosing a location, a district with no school tax on January 1, 2027 should not add one afterward under this section.
Which Districts Levy the Tax
The districts below appear in the Secretary of State directory or in local notices. Treat each entry as a starting point, not a final rate, and confirm the current figure before you set up withholding.
| District or Jurisdiction | Rate as Reported | What to Confirm |
|---|---|---|
| Louisville Metro (Jefferson County) | Louisville Metro's 2.2% combined rate already includes a 0.75% school share | Whether the 0.75% school share has changed since the Jefferson County 0.25% allowance ended on April 14, 2026 |
| Warren County Public Schools | 0.5%, levied on top of the city or county rate | The current rate. The figure comes from a 2024 notice. |
| Scott County Public Schools | 0.5% | The current rate and how it stacks with your city or county rate |
| Fayette County Public School District | 0.5% on net profits | The rate remains 0.5%. See the note below. |
This list is not exhaustive. Many other districts may levy the tax, and the Secretary of State directory and local notices are the places to check for each one.
Fayette County: A Void Vote Does Not Change the Rate
The Attorney General ruled on June 4, 2025 that the Fayette County Public School District board's May 2025 vote to seek a 0.75% rate was void because the required public notice was not given. The rate listed for Fayette remains 0.5% on net profits.
If you saw a headline about a 0.75% Fayette school tax in 2025, that proposal did not take effect. Do not withhold at 0.75% based on that vote.
Lexington: Ask Before You Stack Rates
Lexington's own rate page states a 2.25% occupational rate and does not mention a school tax. That silence does not tell you whether the school share applies in the Lexington area or whether it is already part of the 2.25%. Do not add a school rate to the Lexington figure on your own. Call the Lexington-Fayette Urban County Government (LFUCG) Division of Revenue at (859) 280-8300 and ask whether withholding includes the school tax, and get the answer in writing.
How to Confirm the Rate for Your Business
- Identify the school district for each location. School district boundaries do not always match city limits, so a business inside a city can fall in a different school district than its neighbors. Confirm the district for the address where you work or hold inventory, not just the mailing address.
- Identify the city or county occupational license tax district. Many Kentucky cities and counties levy an occupational license tax on payroll or net profits. Each jurisdiction runs its own forms and revenue office, so the city and the school district may use different filing paths.
- Check the current notice for each jurisdiction. Look for the effective date and whether the rate is stated as a total or as separate city and school shares.
- Ask the local revenue office in writing. Confirm whether the school share is withheld, whether it is included in a combined rate, and whether it applies to payroll, net profits or both.
- Register your tax account. Businesses register with the Kentucky Department of Revenue using Form 10A100 through MyTaxes.ky.gov. Registration with the state does not replace the local filings described above.
Related Obligations That Are Separate From the School Tax
Keep the school district tax separate from your other Kentucky obligations, since each has its own deadline and agency:
- Limited Liability Entity Tax (LLET): LLCs and corporations owe the LLET, which has a $175 minimum if Kentucky gross receipts or gross profits are $3 million or less. Kentucky has no franchise tax, and LLC income passes through to members, who are taxed at the 3.5% flat individual rate for 2026.
- Annual report: The Kentucky annual report is $15 and is due June 30 every year. The filing window opens January 1. Domestic entities that miss June 30 are administratively dissolved.
- Industry licenses: Kentucky licenses by agency or trade rather than by statewide business license. The Department of Housing, Buildings and Construction covers electricians, plumbers and HVAC. There is no statewide general contractor license. Local health departments issue food permits. None of these are the same as the school district occupational tax.
Common Mistakes With the School District Tax
- Assuming the city rate already includes the school share. Louisville Metro's 2.2% includes a school share, but Warren County stacks its 0.5% on top of the city or county rate. You cannot assume either pattern holds everywhere.
- Relying on a void vote. The Fayette County 0.75% proposal was void for lack of public notice, and the listed rate stays 0.5%.
- Using the old Jefferson County figure. The extra 0.25% allowance ended April 14, 2026.
- Missing the freeze date. After January 1, 2027, a district without a school tax cannot start one, and a district with one cannot raise its rate.
- Adding rates together without checking. Combining a city rate and a school rate from different sources can overstate or understate your withholding.
When to Involve a Professional
A single-location business in one jurisdiction can often confirm its rate with the local revenue office in an afternoon. The job gets harder if you have employees who live in one district and work in another, if you operate in several cities, or if you are deciding where to open a second location. In those cases, a CPA who handles Kentucky local taxes can review your payroll setup and your net profits calculation. A business attorney can review entity structure questions. This guide is not a substitute for either.
The Kentucky Small Business Development Center at kentuckysbdc.com can help you organize your questions before you contact a revenue office or a tax professional.
Official Resources
- Kentucky Department of Revenue
- Kentucky Secretary of State, Division of Business Filings
- Kentucky Secretary of State business search
- Kentucky One Stop Business Portal
- SBA Kentucky district office
Final reminder: this article is informational, not legal or tax advice. Confirm every rate, date and filing requirement with the agency or district named above before you act on it.