The Kentucky Schedule ITC, officially known as the Individual Tax Credit Schedule, is an essential form for taxpayers in the state who need to claim specific nonrefundable business incentives, personal tax credits, or the family size tax credit. This document acts as an attachment to your primary state income tax return, helping you reduce your overall tax liability based on qualifying investments, personal circumstances, or the size of your household and income level. Whether you are a small business owner, a member of a limited liability entity, someone who has paid taxes to another state, or a taxpayer qualifying for personal credits due to age or military service, this schedule is where those financial benefits are calculated and claimed. It is divided into three main sections: Section A for business and other tax credits, Section B for personal tax credits like age and blindness, and Section C for the family size tax credit based on modified gross income.
To file this schedule, you must first complete your primary state income tax return. Once you have determined your eligibility for any of the credits listed, you will fill out the corresponding lines on the Schedule ITC. Many of these credits require preapproval from state agencies or specific attachment schedules and certifications to be submitted alongside your return. After calculating your total credits on this schedule, you will carry the final amounts over to the designated lines on your main tax return form. The Schedule ITC must be enclosed with your completed return when you submit it to the Department of Revenue.
How to Complete Kentucky Schedule ITC
Section A: Business Incentives and Other Tax Credits
Line 1: Nonrefundable Limited Liability Entity Tax Credit
If you are a partner, member, or shareholder of a limited liability pass-through entity, enter your proportionate share of the limited liability entity tax credit. This credit is applied only against the income tax assessed on your share of the entity’s distributive income. You must enclose Worksheet C or Schedule K-1.
Line 2: Kentucky Small Business Tax Credit
Enter the approved credit amount if your small business created and filled one or more eligible positions for twelve months and invested at least five thousand dollars in qualifying equipment or technology. You must have final approval from the Kentucky Economic Development Finance Authority and enclose Schedule K-1.
Line 3: Kentucky Selling Farmers Tax Credit
If you are a selling farmer who has received approval from the Kentucky Economic Development Finance Authority, enter your approved credit amount here. This credit cannot exceed twenty-five thousand dollars for the year. You must enclose Schedule K-1.
Line 4: Skills Training Investment Tax Credit
Enter the credit amount certified by the Bluegrass State Skills Corporation for skills training investments. You must enclose a copy of the Kentucky Schedule K-1 for the year the credit was approved.
Line 5: Certified Rehabilitation Tax Credit
Enter the credit amount for certified rehabilitation expenses on qualifying historic residential or commercial properties. You must enclose copies of the certification.
Line 6: Credit for Tax Paid to Another State
If you paid income tax to another state on income also taxed by Kentucky, enter the calculated credit here. You must compute this using Worksheet A and enclose a copy of the other state’s tax return.
Line 7: Employer’s Unemployment Tax Credit
If you hired unemployed Kentucky residents who meet specific certification criteria, enter the total credit amount here. You can claim one hundred dollars for each qualified person. You must enclose Schedule UTC.
Line 8: Recycling/Composting Equipment Tax Credit
Enter the approved credit amount for purchasing qualifying recycling or composting equipment used exclusively in Kentucky. You must enclose Schedule RC and/or Schedule K-1.
Line 9: Kentucky Investment Fund Tax Credit
Enter the credit amount for certified cash contributions to a Kentucky investment fund. You must enclose the notification from the Kentucky Economic Development Finance Authority.
Line 10: Qualified Research Facility Tax Credit
Enter the credit amount for costs associated with constructing, equipping, expanding, or remodeling facilities in Kentucky for qualified research. You must enclose Schedule QR.
Line 11: GED Incentive Tax Credit
If you are an employer who assisted an employee in completing a learning contract to obtain a high school equivalency diploma, enter the credit here. You must enclose Form DAEL-31.
Line 12: Voluntary Environmental Remediation Credit
Enter the approved credit amount if you have an agreed order with the Environmental and Public Protection Cabinet for environmental remediation. You must enclose Schedule VERB.
Line 13: Biodiesel and Renewable Diesel Credit
If you are an approved producer or blender of biodiesel or renewable diesel, enter your certified credit amount here. You must enclose Schedule BIO.
Line 14: Clean Coal Incentive Tax Credit
Enter the credit amount for eligible coal purchased and used to generate power at a certified clean coal facility. You must enclose Schedule CCI.
Line 15: Ethanol Tax Credit
If you are an approved ethanol producer, enter your certified credit amount here. You must enclose Schedule ETH.
Line 16: Cellulosic Ethanol Tax Credit
If you are an approved cellulosic ethanol producer, enter your certified credit amount here. You must enclose Schedule CELL.
Line 17: Railroad Maintenance & Improvement Credit
Enter the credit amount for qualified expenditures related to maintaining or improving Class II or Class III railroads in Kentucky. You must enclose Schedule RR-I.
Line 18: Endow Kentucky Credit
Enter the approved credit amount for making a qualifying endowment gift to a community foundation. You must enclose Schedule ENDOW.
Line 19: New Markets Development Program Tax Credit
Enter the approved credit amount for making a qualified equity investment in a qualified community development entity. You must enclose Form 8874(K)-A.
Line 20: Distilled Spirits Credit
Enter the credit amount for ad valorem property taxes paid on distilled spirits. You must enclose Schedule DS.
Line 21: Angel Investor Credit
Enter the approved credit amount for making qualifying investments in eligible Kentucky small businesses. You must enclose the certification letter.
Line 22: Inventory Tax Credit
Enter the credit amount for ad valorem property taxes timely paid on inventory. You must enclose Schedule INV and/or Worksheet INV.
Line 23: Renewable Chemical Production Tax Credit
If you are an approved producer of renewable chemicals, enter your certified credit amount here. You must enclose Schedule CHEM.
Line 24: Qualified Broadband Investment Tax Credit
Enter the approved credit amount for investments in the expansion of broadband services in Kentucky. You must enclose Schedule KQBI.
Line 25: Total of Other Tax Credits
Add lines 1 through 24 and enter the total here. You will also enter this amount on the specified line of your main state income tax return.
Section B: Personal Tax Credits
Line 1: Taxpayer Age 65 or Over
If you were 65 or older on or before the last day of the tax year, enter 40 in the designated space.
Line 2: Taxpayer Legally Blind
If you were legally blind on the last day of the tax year, enter 40 in the designated space.
Line 3: Taxpayer in Kentucky National Guard
If you were a member of the Kentucky National Guard on the last day of the tax year, enter 20 in the designated space.
Line 4: Allowable Taxpayer Credit
Add lines 1 through 3 and enter the total allowable credit for the taxpayer.
Line 5: Spouse Age 65 or Over
If your spouse was 65 or older on or before the last day of the tax year, enter 40 in the designated space.
Line 6: Spouse Legally Blind
If your spouse was legally blind on the last day of the tax year, enter 40 in the designated space.
Line 7: Spouse in Kentucky National Guard
If your spouse was a member of the Kentucky National Guard on the last day of the tax year, enter 20 in the designated space.
Line 8: Allowable Spouse Credit
Add lines 5 through 7 and enter the total allowable credit for the spouse.
Line 9: Single or Married Filing Separately
For filing status Single or Married filing separate returns, enter the amount from line 4 here and on the designated line of your main tax return. The amount cannot exceed 100.
Line 10: Married Filing Separately on Combined Return (Taxpayer)
For filing status Married filing separately on a combined return, enter the taxpayer amount from line 4 here and on the designated line of your main tax return. The amount cannot exceed 100.
Line 11: Married Filing Separately on Combined Return (Spouse)
For filing status Married filing separately on a combined return, enter the spouse amount from line 8 here and on the designated line of your main tax return. The amount cannot exceed 100.
Line 12: Married Filing Jointly
For filing status Married filing jointly, add line 4 and line 8. Enter the total here and on the designated line of your main tax return. The total amount cannot exceed 200.
Section C: Family Size Tax Credit
Qualifying Dependents
Enter the first and last name, Social Security number, and relationship to you for each dependent qualifying for the family size credit. Check the box if they are a qualifying child for the family size tax credit.
Family Size Tax Credit Table
Use the provided table to find your credit percentage. You will locate the column matching your family size and follow the row that corresponds to your calculated modified gross income to find the applicable percentage.
Family Size Tax Credit Calculation
Multiply the tax amount from your main return by the applicable family size tax credit percentage you found in the table. Enter this final amount on the designated line of your main tax return form to claim the Family Size Tax Credit.