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HB 575

AN ACT relating to inheritance tax deductions.

2026 Regular Session Introduced by Mark Hart

HB 575 narrows and clarifies Kentucky inheritance tax deductions, sets caps on funeral costs, allows certain spouse debts, and requires federal tax deductions to align with Kentuck

to Appropriations & Revenue (H)
#deaths #funeralsandfuneraldirectors #taxation #inheritanceandestate
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WeVote Research Nonpartisan
Bill Summary · HB 575

Summary of HB 575 (2026 Regular Session, Kentucky)

Purpose and intent

HB 575 relates to the calculation of inheritance (estate) tax deductions in Kentucky. It specifies which expenses and debts may be deducted when determining the distributive shares of an estate subject to Kentucky inheritance tax, and it updates certain deduction amounts and timing.

Key provisions and changes

  • Deduction framework for valuing distributive shares (KRS 140.090):
    • The following items may be deducted, and no others:
    • (a) Debts of the decedent, with two exclusions:
      • Debts secured by property not subject to Kentucky tax jurisdiction
      • Debts barred by the statute of limitations
    • (b) Taxes accrued and unpaid, except those on property not subject to Kentucky tax jurisdiction
    • (c) Death duties paid to foreign countries
    • (d) Federal estate taxes: deductible in the proportionate amount that the Kentucky-subject net estate bears to the total net estate subject to federal estate taxes; all calculations require approval by the Kentucky Department of Revenue
    • (e) Drainage, street, or other special assessments that are liens on the property and unpaid
    • (f) Funeral, monument, and cemetery lot maintenance expenses actually paid, with caps:
      • $5,000 total for deaths prior to August 1, 2026
      • $10,000 total for deaths on or after August 1, 2026
    • (g) Commission of executors and administrators that is actually allowed and paid
    • (h) Cost of administration, including attorney’s fees actually allowed and paid
  • Spousal debt treatment (special provision):
    • Notwithstanding other provisions of Kentucky law (KRS 404.040), the debts of a deceased wife may be recognized as deductible in calculating the distributive shares of her estate for purposes of this chapter, provided such debts are paid from the wife’s estate proceeds. This is subject to the same limitation as in subsection (1)(a) regarding debts and the paid-from-proceeds condition.

Who/what is affected

  • Estates subject to Kentucky inheritance tax: The bill affects how deductions are applied to compute distributive shares, potentially altering the net value of an estate that is taxable in Kentucky.
  • Executors, administrators, and legal/financial professionals: Those responsible for administering estates will apply these specific deduction rules, including caps and proportionate federal tax deduction rules.
  • Spousal debt treatment: The bill modifies treatment of debts of a deceased wife, allowing certain debts to be deductible if paid from the wife’s estate.

Procedural and timeline aspects

  • Effective timing of certain deduction caps:
    • The increase in the funeral, monument, and cemetery lot maintenance expense cap to $10,000 applies to deaths on or after August 1, 2026. Prior to that date, the cap is $5,000.
  • Administration and review:
    • All calculations involving federal estate tax deductions are subject to approval by the Kentucky Department of Revenue, indicating administrative oversight and potential for Department guidance or dispute resolution.
  • Legislative history (highlights):
    • Introduced in the House on February 5, 2026
    • Referred to Appropriations & Revenue (H) on February 12, 2026
    • Has an action history indicating committee consideration

Potential impact

  • By narrowing or clarifying eligible deductions and adjusting caps (notably the funeral/cemetery cap after 2026), the bill could affect the taxable value of estates subject to Kentucky inheritance tax.
  • The proportional federal estate tax deduction (subsection 1(d)) ensures Kentucky’s state tax treatment remains aligned with the federal tax context, but tied to Kentucky’s share of the net estate.
  • The special provision granting deduction for a deceased wife’s debts, paid from her estate, could alter how certain familial debts reduce taxable estate value.

If you’d like, I can provide a plain-language example showing how a hypothetical estate would compute deductions under the current law versus HB 575.

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

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