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HB 27

AN ACT relating to contributions made to a Kentucky Saves account.

2026 Regular Session Introduced by George Brown and 1 co-sponsor

HB 27 creates a 2027–2030 Kentucky Saves incentive allowing a tax exclusion or a 50% refundable credit for 529 contributions, with caps and reporting requirements.

to Appropriations & Revenue (H)
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Bill Summary · HB 27

Summary of HB 27 (2026 Regular Session, Kentucky)

Purpose and intent

HB 27 relates to how contributions to a Kentucky Saves account are treated for state income tax purposes, and it creates a new Kentucky Saves incentive. The bill also makes several conforming amendments to the state's tax code to accommodate the new exclusion or credit for Kentucky Saves contributions, and it reorganizes the ranking (priority) of various tax credits when multiple credits apply.

Key provisions

  • Kentucky Saves provisions (new Section 2, KRS Chapter 141)

    • Defines:
    • “Contribution” as the amount contributed to a Kentucky Saves account.
    • “Kentucky Saves account” as a 529-qualified tuition program account within the Kentucky State Treasurer’s trust framework (KRS 164A.310).
    • Tax treatment for tax years starting 2027 through 2030 (inclusive):
    • Taxpayers may elect either:
      • An exclusion from gross income for the amount contributed, subject to annual limits (see below), or
      • A refundable credit against the state income tax.
    • Exclusion amount limits (per taxable year):
      • Up to $1,500 for an individual filer.
      • Up to $3,000 for married filing jointly.
    • The Kentucky Saves credit (if chosen instead of exclusion) equals 50% of the total contributions made during the year, with caps:
      • $250 credit for individuals with gross income ≤ $175,000.
      • $500 credit for married couples filing jointly with combined income < $350,000.
    • Higher-income taxpayers (above these thresholds) are not eligible for the refundable credit but may still use the income exclusion (subject to the annual limits).
    • If a taxpayer uses the exclusion, they may not claim the Kentucky Saves credit for the same year (no double benefit).
    • Administrative and reporting requirements:
    • By November 1 each year, the Department of Revenue must report to the Legislative Research Commission (via the Interim Joint Committee on Appropriations and Revenue) on:
      • The number of returns claiming the exclusion and the number claiming the credit.
      • The total amount of exclusions and credits claimed for each year.
      • For AGI ranges (in increments of up to $5,000), the number of returns and amounts for exclusions and credits.

  • Tax code sequencing and credits (Section 3, amendments to KRS 141.0205)

    • The bill preserves and clarifies the order in which credits are applied against Kentucky’s income tax when multiple credits could apply.
    • Retains a long priority list for nonrefundable business and personal tax credits, and places the Kentucky Saves credit within the refundable credits as one of the last categories to be applied (alongside other refundable credits such as pass-through entity credits).
    • The detailed credit ordering ensures that the Kentucky Saves credit would be claimed after nonrefundable credits and certain other refundable credits, and before some other refundable credits listed.

  • Editorial/administrative amendments (Section 4, KRS 131.190)

    • Maintains confidentiality protections for tax information and clarifies access for official uses in certain enumerated contexts, including reporting and data sharing within state agencies and with the Legislative Research Commission for the Kentucky Saves program.

Who is affected

  • Individual Kentucky taxpayers and married couples filing jointly who contribute to a Kentucky Saves (Section 529) account for qualified education expenses.
  • Taxpayers with income within the specified thresholds who opt for the refundable credit.
  • The Kentucky Department of Revenue, which would administer the exclusion/credit, track take-up, and produce annual reporting.
  • The Kentucky Saves program (trust) administering 529 accounts remains the mechanism for the tax-advantaged contributions.

Procedural and timeline aspects

  • Effective for tax years beginning on or after January 1, 2027, and before January 1, 2031.
  • Taxpayers may choose either:
    • An income exclusion of the contributed amount (up to the per-year limits), or
    • A 50% refundable credit of contributions (subject to income-based caps).
  • Annual reporting to the Legislative Research Commission by November 1 in each year that the credit or exclusion is claimed.
  • If multiple credits are available in a year, the bill sets a stipulated order of application (credit sequencing), consistent with existing processes for Kentucky tax credits.

Potential impact

  • Provides an additional tax-advantaged pathway to save for higher education through the Kentucky Saves program.
  • Creates a temporary (2027–2030) incentive window with relatively generous individual caps, especially for joint filers, which could encourage more Kentucky residents to contribute to 529 accounts.
  • For higher-income taxpayers, the benefit would be limited to the exclusion (not the refundable credit), potentially influencing planning around AGI and deductions.
  • Requires administrative capacity for annual reporting and for managing the sequencing of credits.

Note: This summary reflects the bill text as introduced/unofficial copy. If enacted, the bill could be subject to amendments that would alter these provisions.

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

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