What Is the Kentucky Occupational License Tax?
The Kentucky Occupational License Tax (OLT) is a local payroll tax levied by counties and cities throughout Kentucky. Unlike most states where local income taxes are limited to a handful of cities, every single Kentucky county can levy an OLT on wages earned within its boundaries. Many cities levy their own OLT on top of the county tax.
For developers building payroll systems, Kentucky is one of the most complex states to implement because of this stacking behavior.
How Kentucky OLT Stacking Works
This is the critical detail most payroll systems get wrong: Kentucky city and county OLT taxes stack. An employee working in a city that levies an OLT owes both the city OLT and the county OLT.
Example: An employee working in Florence, Kentucky:
- Boone County OLT: 0.56% on gross wages
- Florence city OLT: 2.0% on gross wages
- Total local payroll tax: 2.56%
Both taxes are due. The city OLT does not replace or credit against the county OLT.
# Query both city and county OLT in one call
curl "https://payroll-tax-api-9f4b18020da9.herokuapp.com/v1/rates/lookup\
?workState=KY&workCity=Florence&workCounty=Boone\
&payDate=2026-01-01" \
-H "Authorization: Bearer ptx_free_your_key"
The API returns both tax records, correctly identified as separate city-type and county-type taxes.
County OLT Rates (2024-2026)
All 120 Kentucky counties levy an occupational license tax. Here are rates for the most populated counties as of 2026 (rates were stable across 2024-2026 for most counties):
| County | OLT Rate | Wage Cap | Notes |
|---|---|---|---|
| Jefferson (Louisville) | 1.45% (nonresident) | None | Unified government; Louisville Metro |
| Fayette (Lexington) | 2.25% | None | Unified government; Lexington-Fayette |
| Kenton | 0.6997% | $176,100 | Northern KY; wage cap matches SS base |
| Boone | 0.56% | None | Northern KY; Florence is in Boone County |
| Campbell | 1.0% | None | Northern KY |
| Daviess | 0.35% | None | Owensboro area |
| Warren | 1.55% | None | Bowling Green area |
| Hardin | 1.5% | None | Elizabethtown area |
| Bullitt | 1.5% | None | South of Louisville |
| Madison | 1.25% | None | Richmond area |
| Pike | 1.0% | None | Eastern KY |
| Boyd | 1.0% | None | Ashland area |
Most county OLT rates range from 0.35% to 2.25%. A few counties have wage caps (Kenton County caps at $176,100, matching the 2025 Social Security wage base).
City OLT Rates (2024-2026)
In addition to county OLT, many Kentucky cities levy their own occupational license tax. Here are the major cities:
| City | City OLT Rate | County | Combined Rate |
|---|---|---|---|
| Louisville | 2.20% (resident) / 1.45% (nonresident) | Jefferson | 2.20-1.45% (unified) |
| Lexington | 2.25% | Fayette | 2.25% (unified) |
| Florence | 2.0% | Boone | 2.56% combined |
| Ashland | 2.5% | Boyd | 3.5% combined |
| Covington | 2.5% | Kenton | 3.20% combined |
| Highland Heights | 2.0% | Campbell | 3.0% combined |
| Bowling Green | 1.85% | Warren | 3.4% combined |
| Georgetown | 1.5% | Scott | 2.5% combined |
| Richmond | 2.0% | Madison | 3.25% combined |
| Somerset | 2.0% | Pulaski | 3.0% combined |
| Campbellsville | 1.5% | Taylor | 2.5% combined |
Rate Changes 2024-2026
Several Kentucky cities adjusted their OLT rates during this period:
- Florence: Maintained 2.0% throughout 2024-2026
- Ashland: Stable at 2.5% — one of the highest city OLT rates in Kentucky
- Highland Heights: Maintained 2.0% on top of Campbell County's 1.0%
- Somerset and Campbellsville: Both maintained rates through the period but represent growing cities that payroll systems increasingly need to cover
Special Cases
Louisville and Lexington (Unified Governments)
Louisville (Jefferson County) and Lexington (Fayette County) are unified city-county governments. They do not have separate city and county OLT — instead, they levy a single occupational tax at the unified government level:
- Louisville Metro: 2.20% resident / 1.45% nonresident
- Lexington-Fayette: 2.25%
When querying the API for these jurisdictions, they appear as city-type jurisdictions, not county-type.
Wage Caps
Most Kentucky OLT jurisdictions do not cap taxable wages. A few exceptions exist:
- Kenton County: Capped at $176,100 (2025 SS wage base)
- Some smaller jurisdictions reference the SS wage base as their cap
Employer vs. Employee Portions
The OLT is typically levied on the employee's gross wages, but it's the employer's obligation to withhold and remit. Some jurisdictions also levy a separate employer-side payroll tax (net profits tax on businesses), but the employee withholding is the most common.
Implementing Kentucky OLT in Your Payroll System
Key Requirements
- Always query both city AND county when the employee works in a Kentucky city. Both taxes stack.
- Handle unified governments (Louisville, Lexington) as single city-type lookups, not city + county.
- Track wage caps — Kenton County and a few others cap taxable wages.
- Store effective dates — rates can change January 1 of any year. Always query by pay date.
- Distinguish resident vs. nonresident — Louisville has different rates; most other jurisdictions charge the same rate regardless.
API Integration Example
// Look up KY OLT for an employee in Covington, Kenton County
const response = await fetch(
'https://payroll-tax-api-9f4b18020da9.herokuapp.com/v1/rates/lookup' +
'?workState=KY&workCity=Covington&workCounty=Kenton' +
'&payDate=2026-01-15',
{ headers: { 'Authorization': 'Bearer ptx_free_your_key' } }
);
const data = await response.json();
// data.taxes will include:
// - Kenton County OLT (0.6997%, wage cap $176,100)
// - Covington city OLT (2.5%, no wage cap)
// - Kentucky state income tax
// - Federal taxes
Historical Context
Kentucky's OLT system has been in place for decades, but the coverage in payroll tax databases has historically been incomplete. Many payroll providers only covered the largest cities and counties, leaving employers to manually calculate and remit OLT for smaller jurisdictions.
PayrollTax API covers all 120 Kentucky counties and 33+ cities with OLT, with rates current for 2024-2026. Get a free API key to start querying Kentucky OLT rates today.