Kentucky’s property tax is a cornerstone of how we fund public services that keep our communities safe, educated and healthy — especially at the local level. Approximately $5 billion is collected in Kentucky annually from property taxes, which apply to real estate and personal property, such as vehicles and boats. Kentucky’s property taxes, meanwhile, are among the lowest in the country. Almost half of real estate property tax revenue in Kentucky goes to fund schools, with the remainder dedicated to counties, cities, the state and special districts for needs ranging from libraries to health departments.
The property tax is a critical component of a diverse, resilient tax system because it adds stability to revenues. Capping, freezing or even eliminating property tax for broad groups of individuals, as some are proposing, disproportionately benefits the wealthy and harms Kentucky communities because it serves as the primary source of revenue for so many local services. The property tax can be modified in ways that would make it fairer, but it should be protected as a vital revenue source.
State and local entities rely on property tax revenues to pay for countless services across Kentucky
Multiple levels of government use property taxes to generate revenue:
- The state – Revenues generated from the state’s levy of property taxes go to the state general fund, providing 5% of total revenue in 2025. General Fund revenue goes primarily to education, health care and human services.
- Schools – Property taxes are the largest source of local funding for school districts, providing 72% of local school revenue in 2023. They provide 24% of total school revenue in Kentucky.
- County governments – Property taxes are one of the most important and predictable sources of revenue for city and county governments. Nearly 35% of all county revenue comes from property taxes in 2023. In some counties it is more than 75%.
- City governments – Property taxes made up 23% of locally generated city tax revenue in 2025.
- Special districts – County and city governments can create special taxing districts to fund and provide specific public services such as libraries, fire protection, soil conservation, ambulance services, cooperative extension services, and more. There are currently 445 of these special districts across the state, and for many of them, their primary or only source of revenue is the property tax.
In 2023, Kentucky collected $4.94 billion from all property taxes. Property taxes apply to real estate, motor vehicles, boats, airplanes, and other tangible property like business equipment, but most of the property tax revenue comes from the tax on real estate.
Rates are levied by local officials as cents per $100 of assessed value. In 2024, the average real property rates across Kentucky were 65 cents for school districts, 33 cents for counties, 21 cents for cities, 11 cents for the state and 11 cents for special districts. However, this distribution varies widely depending on location, and specific local rates can be found in the Kentucky Department of Revenue’s 2024 Property Tax Rate Book.
Cities, counties and special districts use the money collected from property tax to fund many essential services that we all rely on, such as:
- Fire and emergency services
- Public safety
- Road and street infrastructure
- Snow removal
- Water and sewer management
- Housing assistance
- Public transit
- Public employee pay, pensions and benefits
- Libraries
- Sanitation and recycling
- Utilities
- Industrial development
- Animal control
- Code and nuisance enforcement
- Parks and recreation
- Senior citizen services
- Elections
- Planning and zoning
- Coroner services
- Soil conservation
- Public health
- Tourism
Property taxes have been a key part of the tax system throughout our state’s history and are the only taxes required by the Kentucky constitution. The amount owed in property taxes is based on a combination of the assessed value of the property to be taxed, and the rate imposed against that amount. Property valuation administrators (PVAs) are elected in each of Kentucky’s 120 counties and are responsible for the assessment of most property located within the county they serve. Assessments are made at fair cash value, estimated at a price that a willing buyer would pay and a willing seller would accept.
The Kentucky Constitution does provide some exemptions from the general requirement that all property be taxed, including property owned by charitable institutions, government entities, schools and religious institutions. There is also a homestead exemption, which is granted to all property owners 65 years of age and older and property owners classified as totally disabled for their primary residence. The exemption amount is recalculated every two years to adjust for inflation. For 2026 the homestead exemption amount is $49,100, which is deducted from the assessed value of the property owner’s home and taxes are paid on the remaining assessment.
The second part of the property tax calculation is the rate imposed against the assessed value, which already has built-in restrictions. At the state level, the real property rate is automatically recalculated each year so that no more than 4% in new revenues are generated as the assessment base increases. As a result, since 1979 the state rate has dropped from 35 cents per $100 of valuation to the 2025 rate of 10.9 cents per $100 of valuation. At the local level, governing bodies of cities, counties, school districts and special districts set new rates annually after they receive the assessed values, and their ability to increase rates are limited by statute and can be subject to recall in some cases.
Eliminating or broadly capping property taxes is costly
Property taxes are uniquely suited to fund services like public education and public safety, as they tend to remain more stable during economic downturns than other taxes like sales and income tax. Tying local services to property taxes protects the schools we send our children to, the roads we drive on, and the programs that keep our communities safe and healthy during hard times. Kentucky’s property taxes are already very low compared to other states. As of 2024, Kentucky had the 8th lowest effective property tax rate of owner-occupied housing in the U.S.
There is also no reasonable replacement for property taxes at the local level. The recent proposals to reduce or eliminate certain property taxes come at a time when the Kentucky General Assembly has already significantly compromised state revenues by cutting our state income tax rate, resulting in the loss of over $2.1 billion in revenues annually. That makes it more important than ever to protect the property tax.
Rather than seeking repeal of the property tax or broad-based changes that disproportionately benefit the wealthy, Kentucky can consider property tax reforms that help struggling residents stay in their homes and make property taxes more predictable and affordable. Any reforms should be specifically targeted to provide relief to those who truly need the help while protecting revenues for schools and other public services that rely on property tax revenues.
