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Bill Summary · HB 725

Overview

HB 725 (2026 Regular Session, Kentucky) proposes a new deduction to be added to the individual income tax calculation beginning in tax year 2027. The deduction would allow taxpayers to subtract the amount paid for professional membership dues from their gross income, provided the dues are not deducted under Section 162 of the Internal Revenue Code. The bill also makes related amendments to confidentiality provisions and administrative reporting.

Purpose and intent

  • Create a targeted deduction for professional membership dues, easing the tax burden for individuals who must maintain professional licenses or associations as part of their employment.
  • Align Kentucky’s treatment of professional dues with prospective allowances under federal tax rules, offering an additional deduction beyond standard itemized or standard deductions.

Key provisions and changes

  • Section 1 (KRS 141.019 – individual income tax)

    • NEW Deduction (Section 1, paragraph (r)):
    • For taxable years beginning on or after January 1, 2027, but before January 1, 2031, taxpayers may exclude professional membership dues paid during the taxable year from income, provided those dues are not deductible under Internal Revenue Code Section 162.
    • Definition: “Professional membership dues” means the total dues, fees, assessments, or other charges required to maintain a professional license or an association membership related to employment.
    • Administration and reporting:
    • By November 1 of each year in which the deduction is claimed, the Department of Revenue must report to the Legislative Research Commission (via the Interim Joint Committee on Appropriations and Revenue) the:
      • Number of returns claiming the deduction for each taxable year.
      • Total amount of the deductions claimed and the total reduction in tax liability for each year.
      • Breakdown of reduced tax liability by adjusted gross income (AGI) ranges in increments of up to $5,000.
    • The reporting data is not confidential and may be disclosed.
    • Other miscellaneous provisions retained or amended:
    • Several other adjustments to the Kentucky personal income tax calculations continue to reflect prior federal and state rules (e.g., treatment of certain pension distributions, depreciation, 199A, exclusions related to military pay and benefits, etc.).
    • Elective option:
    • Taxpayers may elect to claim the standard deduction under KRS 141.081 instead of itemizing deductions pursuant to 26 U.S.C. § 63 and modified by this section.

  • Section 2 (KRS 131.190 – confidentiality and disclosure)

    • The bill maintains and clarifies confidentiality protections for tax information, with specific allowances for disclosure in certain enumerated circumstances and to certain state and federal offices under confidentiality constraints.
    • It also enumerates limited scenarios in which information may be shared or released (e.g., for court actions, public records with caveats, or to specific agencies under statutory authorization).

Who is affected

  • Individual Kentucky taxpayers who itemize and claim deductions on the Kentucky personal income tax return.
  • Taxpayers who pay professional membership dues necessary for maintaining a professional license or association related to their employment.
  • State Department of Revenue, which would administer the deduction, track its use, and generate annual reporting to the Legislative Research Commission.
  • The bill would not alter the deduction for corporate taxpayers (the provision explicitly applies to taxpayers other than corporations).

Procedural and timeline aspects

  • Effective date for the new deduction: Taxable years beginning January 1, 2027, through December 31, 2030 (four-year window).
  • By November 1 of each year in which the deduction is claimed, the Department of Revenue must provide annual, public-facing data to the Legislative Research Commission detailing usage and impact by AGI ranges.
  • Taxpayers retain the option to take the standard deduction instead of itemizing, preserving flexibility.

Potential impacts

  • Tax relief for eligible individuals who incur professional membership dues, potentially reducing taxable income for those expenses.
  • Administrative: increased reporting requirements for the Department of Revenue and a new data stream for legislative oversight.
  • Budgetary impact: the reduction in taxable income could decrease state tax revenue during the four-year window, though the bill does not specify revenue estimates.
  • sunset or evaluation: the deduction is limited to 2027–2030, unless extended or made permanent by subsequent legislation (not specified in the bill text).

If you’d like, I can provide a concise bullet-point summary for quick briefing or a comparison to federal treatment of professional dues.

Compiled from official sources — confirm details with the bill’s official record.

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