Capital gains tax is a tax on income received from the sale of an asset—such as a business, real estate, your home, stocks, bonds, coin collections, and jewelry. Capital gains tax is paid on the financial gain between the amount you paid for (or invested to build) the asset, and the amount for which it is sold.

The rate (percentage) paid as capital gains tax has traditionally been lower than the rate (percentage) paid on income tax. And the Internal Revenue Service (IRS) has traditionally taxed long term gains differently than short term gains—with the distinction based on how long the taxpayer owned or held the asset.

In Kentucky, as in all states, capital gains tax is primarily governed by federal law. Capital gains are the profits from the sale of an asset such as real estate, stocks, or a business, and are taxed differently than regular income. The Internal Revenue Service (IRS) distinguishes between short-term capital gains, which are taxed as ordinary income and apply to assets held for one year or less, and long-term capital gains, which apply to assets held for more than one year and are taxed at lower rates. These rates can vary depending on the taxpayer's income bracket. Kentucky does not have a separate capital gains tax; instead, capital gains are included as part of the state income tax. The state taxes individuals' income, including capital gains, at a flat rate. It's important to consult with an attorney or tax specialist to understand the specific implications for any capital gains transactions, as there may be exemptions or additional considerations, such as the primary residence exclusion, that could affect the amount of tax owed.