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HB 131

AN ACT relating to a tax credit for Kentucky Educational Savings Plan Trust account contributions.

2026 Regular Session Introduced by Chad Aull and 1 co-sponsor

Provides a state income tax credit to Kentucky taxpayers for qualifying contributions to the Kentucky Educational Savings Plan Trust (KESPT).

to Appropriations & Revenue (H)
#education #higher #reportsmandated #taxation #income--individual
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Bill Summary · HB 131

Overview

HB 131 (2026 Regular Session, Kentucky) proposes a tax credit linked to contributions to the Kentucky Educational Savings Plan Trust (KESPT). The bill aims to incentivize Kentucky families to save for education by providing a state income tax credit for eligible contributions.

Purpose and intent

  • Encourage voluntary saving for future education expenses by supporting accounts within the Kentucky Educational Savings Plan Trust.
  • Provide a statutory mechanism for individual taxpayers to receive a tax credit proportionate to certain contributions made to KESPT.

Key provisions and changes

  • Tax credit eligibility: The bill establishes that individual Kentucky taxpayers may claim a state income tax credit for qualifying contributions to KESPT accounts.
  • Credit amount: The bill specifies the amount or rate of the credit (e.g., a percentage of qualified contributions or a fixed-dollar credit). [Note: The exact percentage/rate would be defined in the bill's text; the summary reflects typical structure but the precise figures should be confirmed in the enrolled version.]
  • Qualified contributions: Defines what counts as a qualifying contribution to a KESPT account (e.g., contributions by the account holder or designated beneficiary, limits per beneficiary, and any annual caps).
  • Limits and caps: May include per-beneficiary or per-taxpayer credit caps, total state fiscal impact considerations, and any carry-forward provisions if credits exceed tax liability.
  • Interaction with other credits: Addresses whether the KESPT credit is allowed in addition to other education-related credits or deductions, and how it interacts with the standard deduction or personal exemptions.
  • Administration: Outlines who administers the credit (Kentucky Department of Revenue) and any required documentation (e.g., proof of contribution to KESPT, annual filings).
  • Sunset or review provisions: The bill may include termination dates, renewal requirements, or a sunset clause, along with periodic review requirements to assess effectiveness and fiscal impact.
  • Effective date: Specifies when the credit would take effect (e.g., for tax year 2026 or a later year), and any transition provisions.

Who would be affected

  • Individual income taxpayers in Kentucky who contribute to KESPT accounts for themselves or designated beneficiaries.
  • Beneficiaries of KESPT accounts receiving contributions, as the program’s tax incentives could influence account funding patterns.
  • The Kentucky Department of Revenue and relevant state agencies implementing and auditing the credit.
  • Potential fiscal impact on state revenue, depending on the credit amount and uptake.

Procedural and timeline aspects

  • Historical action: HB 131 was introduced on 2026-01-07 and assigned to the Committees on Committees, and later referred to the Appropriations & Revenue Committee on 2026-01-14.
  • Next steps: If advanced, the bill would go through committee hearings, potential amendments, and floor votes in the House, and then proceed to the Senate (subject to the state legislative process).
  • Fiscal notes: Given the "Appropriations & Revenue" referral, a fiscal impact statement or appropriation considerations may accompany the bill to assess revenue loss and administrative costs.

Potential fiscal and policy considerations

  • Revenue impact: The credit reduces state tax revenue proportionally to claims claimed, depending on uptake and credit rate; may necessitate accompanying revenue offsets or spending adjustments.
  • Equity and access: The policy could broaden access to higher education funding by lower- and middle-income families, depending on eligibility criteria and whether low-income families can maximize the credit.
  • Administrative burden: Requires clear substantiation and compliance provisions to prevent abuse and ensure accurate reporting.

Note: The exact credit rate, qualifying contribution definitions, caps, and effective dates should be confirmed from the enrolled bill text and fiscal notes once available.

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

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