A wage-based tax credit buried in Kentucky's fiscal bill could mean real money for property owners—if you know it exists and how to qualify.
Most Kentucky real estate and property management owners have no idea that a significant tax credit was quietly embedded in HB869, the state's recent fiscal matters bill. And that's a problem, because it could put money directly in your pocket—or your company's account—if your project qualifies.
Here's what you need to know.
HB869 (Section 1, Page 1) creates a refundable income and limited liability entity tax (LLET) credit for companies that meet the state's approval standards. The credit is worth 2.25% of wages paid to full-time employees at projects located in Kentucky's heritage counties, or 1.25% for projects in other counties.
The word "refundable" matters. Unlike a standard tax credit that simply reduces what you owe, a refundable credit can generate a cash payment from the state if the credit exceeds your tax liability. That means the state writes you a check.
The credit goes to "approved companies" selected through the Kentucky Economic Development Finance Authority (KEDFA). You don't automatically get it just by being in business. Your project must go through a preliminary approval process, and that approval must happen after July 1, 2026, to qualify.
This is important: the credit applies to taxable years beginning on or after January 1, 2026. But preliminary approval doesn't happen until after July 1, 2026. That timing window matters for your tax planning.
The credit is capped at $4 million per year statewide. That's a meaningful limit. If multiple projects qualify in the same year, the available credit pool shrinks. The calculation is straightforward: take 2.25% (or 1.25%) of your full-time employee wages, and that's your credit. But you'll need to work with KEDFA to get preliminary approval and understand the application requirements, which the statute doesn't detail here.
If you own or manage a real estate project that involves job creation—whether that's a commercial development, industrial park, mixed-use property, or similar venture—this credit could offset a meaningful portion of your state tax liability. For larger payrolls, the numbers add up quickly.
The heritage county bonus (2.25% vs. 1.25%) is also worth noting. If your project is in a designated heritage county, you get nearly double the credit rate. That's an incentive worth factoring into site selection and project planning decisions.
The catch: you need preliminary approval from KEDFA after July 1, 2026. That means starting conversations with the authority now if you're planning a project that could qualify. The approval process isn't automatic, and the $4 million annual cap means early applicants may have an advantage.
For property owners and managers considering development projects, this credit should be part of your financial modeling—but only if you understand the approval timeline and requirements. Contact KEDFA directly to learn whether your project type and location qualify.
This summary reflects HB869, Section 1, Page 1. Consult a Kentucky tax professional or KEDFA for guidance on your specific situation.