Tax reduction, other new Kentucky laws go into effect Jan. 1

As the calendar turns to 2026, a wide range of new laws will take effect across Kentucky.

January 1 marks another reduction in the state’s individual income tax rate. Supporters say that lower income taxes increase take-home pay, encourage workforce participation, and make Kentucky more competitive in attracting and retaining residents. Critics question government's long-term revenue stability and the impact on paying for public services. 

Kentucky’s teenagers working part-time jobs will no longer be subject to state income tax. The law aims to encourage early workforce participation and help young people build savings or contribute to educational expenses. 

Another change in 2026 is Kentucky’s stiffer consumer data privacy protections. Consumers will be able to request access to personal data held by companies, correct inaccuracies, and request deletion of certain information. Individuals will have the right to opt out of targeted advertising, the sale of personal data, and automated profiling.

Smoke shops and specialty retail businesses will be required to hold updated retail licenses by January 1 to remain operating. The new requirements reflect increased scrutiny of products such as vaping devices, particularly regarding youth access and public health concerns. Retailers that fail to comply risk fines, license suspension, or closure.

Kentucky's insurance companies will have additional expectations on them to provide mental health and substance use disorder coverage. The changes are designed to reinforce treatment for depression, anxiety, and addiction, including more access to counseling, therapy, and recovery services.