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Bill Summary · HB 489

Overview

HB 489 (2026 Regular Session, Kentucky) establishes an eligible child tax credit (nonrefundable) for tax years 2027 through 2030. It defines an “eligible child,” sets the credit amount and limits, coordinates eligibility with public school attendance rules, and requires annual reporting to the Legislature. It also adjusts the order of application for multiple tax credits to prioritize this new credit.

Purpose and intent

  • Create a state-level, nonrefundable eligible child credit to support families with qualifying or “eligible” children who are between ages 6 and 18 and who meet compulsory attendance requirements but do not attend a public school for the tax year.
  • Align eligibility with federal concepts of a “qualifying child,” but with age and attendance requirements tailored to Kentucky.
  • Provide a measurable fiscal impact by detailing annual reporting to lawmakers on utilization and geography.

Key provisions and changes

Section 1: Creation of the eligible child credit (KRS Chapter 141)

  • Definitions:
    • “Eligible child” = akin to a federal qualifying child, but limited to ages 6–18.
    • Must be subject to compulsory attendance under Kentucky law and not attend a public school for the taxable year.
  • Credit amount and limits:
    • Nonrefundable credit of $4,000 per eligible child.
    • Credit limited to $8,000 per tax return per taxable year.
  • Administration and eligibility coordination:
    • Kentucky Department of Revenue will work with the Kentucky Department of Education and the local school district to determine attendance eligibility.
  • Reporting requirements:
    • By November 1 of each year a credit is claimed, the Department of Revenue must report to the Legislative Research Commission (for referral to the Interim Joint Committee on Appropriations and Revenue) on:
    • Number of taxpayers claiming the credit per year.
    • Total amount of credit claimed per year.
    • Credit totals by county based on taxpayer address.
    • Reporting data is not confidential and may be disclosed under state law.

Section 2: Credit ordering mechanics (KRS 141.0205 amended)

  • Establishes a priority framework for applying credits when a taxpayer is eligible for multiple credits.
  • Credit ordering sequence (high-level):
    • Nonrefundable credits against the general tax (KRS 141.020) are applied in a specified order, with the eligible child credit positioned among personal nonrefundable credits.
    • Following the nonrefundable credits, refundable and other credits are applied in defined sequences.
  • Specifically, the eligible child credit is listed as one of the nonrefundable personal credits to be applied in the sequence after certain other credits (subsection (2)(a)-(g) and related listings).

Who and what is affected

  • Taxpayers in Kentucky who have eligible children (ages 6–18 who are not attending a public school for the tax year) and who have tax liability under KRS 141.020.
  • School districts and the Kentucky Department of Education, as their attendance data and collaboration determine eligibility.
  • State agencies involved in tax credits, as the new credit integrates into the existing framework for ordering and applying credits against the tax liability.

Procedural and timeline aspects

  • Effective for taxable years beginning on or after January 1, 2027, and before January 1, 2031.
  • Annual reporting deadline: November 1 of each year the credit is claimed.
  • Reports to Legislative Research Commission are for referral to the Interim Joint Committee on Appropriations and Revenue.
  • Data disclosures: Section 1 requires reporting data to be non-confidential and publicly reportable.
  • Administrative changes: Section 2 amends the credit ordering rules to accommodate the new eligible child credit within the sequence of other tax credits.

Potential impacts

  • Fiscal: Creates a new $4,000-per-child credit (capped at $8,000 per return) that reduces state tax liability for qualifying families. Given the nonrefundable nature, it reduces tax due but does not create a refund.
  • Equity and access: Targets families with children not enrolled in public school, potentially including homeschoolers or those in nonpublic settings who meet the attendance criteria.
  • Transparency: Annual county--level reporting will provide visibility into geographic usage, aiding oversight and budget planning.
  • Administrative: Requires coordination between the Department of Revenue, Department of Education, and local districts, and adds reporting obligations.

Note: The bill is presented as an unofficial copy; final statutory language and fiscal impact may be refined during the legislative process.

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

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