Gov. Beshear Signs Law to Exempt Military Pay from State Tax


FORT CAMPBELL, Ky. — In an effort to boost the number of servicemen and women who call Kentucky home, state lawmakers have enacted legislation that exempts military pay from the Commonwealth’s income tax.

Beginning Jan. 1, 2011, all active duty military pay will be exempt from individual income tax, creating an estimated savings of $18 million for eligible taxpayers.  The income tax exemption applies to all military pay earned by active duty soldiers, reservists and members of the National Guard.  Currently the active duty military pay exemption applies only to active duty military pay for military personnel serving in a combat zone.

“Kentucky has both Fort Knox and Fort Campbell within its borders and many of the soldiers stationed there call other states besides Kentucky home,” says Gov. Beshear. “With this legislation, we’re hoping that more of these service men and women will remain in the Commonwealth to raise their families and keep in Kentucky the experience and expertise they have to offer.”

The military pay exemption provision was included in House Bill 3, a wide-ranging economic development initiative passed by the General Assembly during the 2009 Special Session. Language specific to the military benefit was inserted into the bill during conference committee negotiations thanks to the efforts of senior legislative leaders and members of the Senate and House committees on Veterans, Military Affairs and Public Protection.

“Many of our service men and women have put their lives on the line fighting on foreign soil, protecting our country at home or coming to our aid in times of crisis,” said Sen. Joey Pendleton.  “With this tax exemption, we do more than talk about how much we appreciate their sacrifice.  Instead, we offer them some real support during these tough economic times where they can really feel it – in their pocketbooks.  This tax exemption will not completely eliminate their financial hardship, but it will offer some relief and show a little gratitude for great service.  This will be a real help to military families in Kentucky.”

“The cost of exempting active duty military pay from the state income tax is but a small one for state government but a real boon to military families who are already sacrificing so much for our freedom and well-being,” said Sen. Elizabeth Tori. “I am so pleased, after several years of working on the issue, to finally see our efforts come to fruition.”

Fort Campbell is home to the 101st Airborne Division.  Fort Knox is the home of the Patton Museum, and the site of the U.S. Bullion Depository.

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