When you sell a house, a few different taxes come into play. Some you pay at closing, some show up on next year's tax return, and some you may not owe at all. Here's the plain-English rundown for Kentucky. Run your exact situation by a CPA (Certified Public Accountant), since this is general information, not tax advice.

1. Kentucky's transfer tax: paid by the seller

Kentucky charges a real estate transfer tax when a deed is recorded. It's paid by the seller, and it's 0.1% of the sale price, which works out to $1 for every $1,000.

• On a $250,000 sale, that's $250
• It's paid at closing out of your proceeds
• Some transfers are exempt, like certain transfers between family members or with no money involved

2. Property taxes: split at closing

Property taxes get divided between buyer and seller at closing based on how much of the year each of you owns the house. That's called proration.

• In Jefferson County, the yearly bill usually comes from the Sheriff's office in the fall
• If you sell before the bill is paid, you'll typically give the buyer a credit for your share of the year
• If you already paid the full year, the buyer typically credits you back for their share

The exact method is written into the purchase contract, so read that section closely.

3. Capital gains tax: maybe, maybe not

Capital gains tax is tax on your profit, roughly what you sold for minus what you paid and minus the cost of improvements and selling.

If it's your main home

Most homeowners owe nothing, because of a big federal exclusion:

• Up to $250,000 of profit is tax-free if you're single
• Up to $500,000 if you're married and file jointly
• You generally have to have owned and lived in the home for at least two of the last five years

Moved early for a job, health reasons, or other qualifying events? You may still qualify for part of it. See our relocation guide.

If it's a rental or investment property

The exclusion doesn't apply. You may owe capital gains tax, plus tax on depreciation you claimed over the years. Investors often use a 1031 exchange to defer that tax by buying another property. See our 1031 exchange guide.

Kentucky income tax

Kentucky taxes capital gains as regular income. For 2026, Kentucky's flat income tax rate is 3.5%, down from 4% in 2025. So on $40,000 of taxable profit from selling a rental, the Kentucky share would be about $1,400, on top of any federal tax.

If your profit is covered by the federal home-sale exclusion, it generally isn't taxed by Kentucky either.

Inherited houses

Inherited homes usually get a "stepped-up" value as of the date of death, which can shrink or wipe out the taxable gain. See our probate guide.

Other costs at closing (not taxes, but people ask)

• Your mortgage payoff
• Real estate commissions
• Title and closing fees, and deed preparation
• Any agreed repairs or credits to the buyer

Add it all up with our seller net proceeds calculator.

Frequently asked questions

Does the buyer or seller pay transfer tax in Kentucky?

The seller pays it. It's 0.1% of the sale price.

What is Kentucky's income tax rate on a home sale profit?

For 2026, Kentucky taxes capital gains as regular income at its flat 3.5% rate. Profit covered by the federal home-sale exclusion generally isn't taxed.

Will I get a tax form after I sell?

Usually the closing agent files a Form 1099-S with the IRS reporting the sale, and you'll get a copy. That doesn't mean you owe tax. You just may need to report it.

Do I pay capital gains if I buy another house?

For your main home, buying another one doesn't matter. The exclusion is what counts. For investment property, a 1031 exchange can defer the tax if you follow the rules exactly.

Do I owe tax if I sell at a loss?

No gain means no capital gains tax. A loss on your personal home generally isn't deductible, though.

Want your real numbers?

Call Winner Realty at (502) 305-8915 or book a time, and we'll put together a net sheet showing what you'd actually walk away with.