Kentucky’s Flat Tax Is Simple. Your Local License Tax Is Not.
Kentucky’s state income tax is flat, but cities and counties add their own occupational license taxes on business profits or receipts. We show how Louisville, Lexington, and small-town Kentucky owners qualify on deposits instead of a return trimmed by both.
Kentucky’s state tax is one flat rate, but a Kentucky business owner can still file a state return plus one or more local occupational license returns, and every one of them rewards a smaller net profit.
A Kentucky self-employed mortgage is a home loan that qualifies business owners on bank statements, 1099s, or a CPA P&L instead of tax returns. It is built for the Lexington farrier or horse-farm contractor, the Louisville restaurant or trade owner, the Bowling Green builder, and the Covington consultant who works across the river. Kentucky’s flat state tax is easy. Local license taxes on net profits or gross receipts are the part that shrinks your return. The JD.Mortgage Team at PRMG qualifies you on deposits or 1099 gross from 620 FICO (Non-Prime) and 660 FICO (Expanded Prime). 25+ years, 3,100+ closed loans, Scotsman Guide Top Originator 2026. Lending in 49 states. New York excluded.
Last updated: September 24, 2026
Kentucky Self-Employed Mortgage: The Short Answer
Self-employed in Kentucky and turned down because of your tax return? The fix is a different yardstick. We measure income from your deposits, your 1099s, or a 12-month CPA P&L. Scores start at 620, and most files need 2 years in business.
As of Q3 2026 (September 2026): Credit scores start at 620 (Non-Prime, 75% LTV, 43% DTI) and 660 (Expanded Prime, 80% LTV, 50% DTI) (PRMG Non-QM Income Qualifying Product Profile, 09/17/2026). Loan-to-value reaches 89.99% at a 740 score with a 45% DTI (PRMG Non-QM Income Qualifying Product Profile, 09/17/2026). You need 2 years self-employed, and personal bank statements count 100% of deposits (PRMG Non-QM Income Qualifying Product Profile, 09/17/2026). The 2026 conforming loan limit is $832,750 in every Kentucky county (FHFA 2026 conforming loan limits).
Who Uses Self-Employed Loans in Kentucky
Horse-country trades around Lexington
Farriers, equine vets in private practice, trainers, grooms working as contractors, and fence and barn builders keep the Bluegrass horse business running. Many are paid on a 1099 by several farms. Others run their own company and deposit checks from dozens of clients. The 1099 path fits contractors with a few big payers. Business bank statements fit owners with many small ones. Sales seasons and foaling season create swings, so we may use 24 months.
Bourbon-country tourism and hospitality owners
Tour operators, caterers, event venues, and short-term rental hosts along the bourbon trail earn more in spring and fall. PRMG’s guidelines call for 24 months of statements when income is seasonal. For a rental purchase, a DSCR loan qualifies on the property’s rent instead.
Louisville and Northern Kentucky trades and restaurants
Plumbers, roofers, and restaurant owners in Jefferson County and Kenton County often pay local license taxes on top of state tax. A 12-month CPA P&L works if a CPA, EA, or CTEC preparer signs it and deposits land within 35% of the P&L revenue.
Western Kentucky contractors and haulers
Owner-operator truckers and equipment contractors around Owensboro and Paducah carry big depreciation. Bank statements show the work. You need at least 25% ownership of the business for business statements. Owners who run their trucks for several brokers may also have 1099s. If so, the 1099 path can replace one calendar year of personal bank statements, as long as an IRS wage and income transcript backs it up.
Owners who want equity, not a move
Some Kentucky owners are not buying. They want cash for a new trailer or a barn repair without giving up a low first-mortgage rate. Our Kentucky HELOC page covers that. For a full refinance, the same deposit rules apply to a self-employed refinance.
Bank Statements, 1099s, or a P&L: Which One Reads Your Income
Match the document to the way money reaches you. Steady deposits point to bank statements. Client 1099s point to the 1099 path. Clean books kept by a CPA point to the P&L.
| If this sounds like you | Start here | Score floor |
|---|---|---|
| Money lands in your account every week | Bank statements | 620 / 660 |
| Clients send you 1099s | 1099 income | 620 / 660 |
| A CPA already keeps your books | CPA P&L | 660 with 2 months of statements |
| Large savings, uneven income | Asset utilization | 660 |
Deep dives: bank statement loans, 1099 loans, P&L loans, asset utilization. Buying a rental? DSCR loans qualify on the rent.
Not sure which path reads your Kentucky income best? We run every path you qualify for and show you the strongest number.
See What I Qualify ForKentucky’s Flat Income Tax and Local Occupational License Taxes
Kentucky taxes individual income at one flat rate. The Department of Revenue’s individual income tax page describes a flat 4% rate, and the 2026 withholding formula uses 3.5% of taxable income for 2026. The 2026 standard deduction is $3,360, per the Department of Revenue.
Here is where most explanations of Kentucky taxes go wrong. They stop at the flat rate. Many Kentucky cities and counties charge their own occupational license tax. For a business owner, that tax is usually on net profits, and some places use gross receipts. The state does not run these taxes. Its business tax page says plainly: “The Department of Revenue does not administer local occupational, net profits or gross receipts taxes.” So you may file with the state, your city, and your county.
| Kentucky tax | Who collects it | What it does to your return |
|---|---|---|
| Individual income tax | Department of Revenue, flat rate | Every deduction saves a flat percentage |
| Occupational license tax | City and/or county | Taxes net profit or receipts again, locally |
| Self-employment tax | IRS | Pushes owners to cut net profit further |
When net profit is taxed at the state, the county, the city, and the IRS, a CPA will trim it hard. Equipment, vehicles, feed, tack, and a home office all come off. The net that is left is not what you can afford.
We do not qualify you on that net. Business bank statements use 12 or 24 months of deposits times a fixed 50% expense factor. 1099 qualifying uses 100% of gross 1099 income plus YTD, averaged, with an IRS transcript. Local license taxes never enter that math.
A Lexington Example: The Farrier With a Full Truck and a Thin Return
Tax return view (example)
- Schedule C net profit: $54,000 a year
- Monthly income: $4,500
- Example housing payment: $2,650
- Other monthly debts: $600
- DTI = $3,250 / $4,500 = 72.22% (declined)
Business bank statement view (example)
- Average monthly business deposits: $17,000
- Qualifying income: $17,000 x 50% = $8,500 a month
- Example housing payment: $2,650
- Other monthly debts: $600
- DTI = $3,250 / $8,500 = 38.24%
This farrier shoes horses on farms around Lexington and deposits every client’s payment into a business account. A new truck, a forge, steel, and local license taxes cut the return to $54,000. Twelve months of business deposits average $17,000. At the fixed 50% expense factor, qualifying income is $8,500, and the DTI falls to 38.24%. That fits even the 43% cap that comes with a 620 score.
Checklist: Kentucky Self-Employed Loan Basics
| Checklist item | Standard |
|---|---|
| Proof of business | 2 years self-employed, business in place 2 years |
| Minimum score | 620 (75% LTV) or 660 (80% LTV) |
| Top loan-to-value | 89.99% at 740 on a primary home |
| Maximum loan | $3,500,000 at 70% LTV and a 700 score |
| Reserves | 3 months (Non-Prime) to 6 months (Expanded Prime) |
| Occupancy | Primary, second home, or investment |
Figures: PRMG Non-QM Income Qualifying Product Profile, 09/17/2026.
Buying in Kentucky: Loan Limits, Acreage, and Horse Farms
Every Kentucky county is at the 2026 FHFA baseline conforming limit of $832,750 for one unit. That covers most Kentucky homes. For a large home in Lexington’s horse country or a Louisville estate, our self-employed loans run from $100,000 to $3,500,000. The $3.5 million top needs 70% LTV and a 700 score.
Acreage is where Kentucky buyers need to plan. Bluegrass properties often come with 20 acres or more, a barn, and paddocks. Our cap is 15 acres for a primary or second home and 5 acres for an investment property. Rural property maxes at 80% LTV. The home also cannot be a working farm or produce income for you. A house on 10 acres with a run-in shed for your own horses can fit. A boarding operation or breeding farm that earns income does not. If you want the farm and the house, split the plan: buy the home site on 15 acres or less, and finance the rest of the land separately. Talk to us before you write an offer so the parcel fits.
Kentucky also has plenty of lake and second-home country around Lake Cumberland and Kentucky Lake. We allow second homes on 1-unit properties. Warrantable condos go to 89.99% LTV at 740, and non-warrantable condos cap at 80%.
Kentucky Self-Employed Mortgage Myths, Corrected
❌ Myth: “Kentucky has a flat tax, so my return already shows what I really make.”
✅ Fact: A flat rate does not change your deductions. Your Schedule C is still net of equipment, vehicles, and local occupational license taxes. We use your deposits times 50%, or 100% of gross 1099 income, instead of that net number.
❌ Myth: “You need two years of perfect tax returns.”
✅ Fact: Tax returns are not part of the file. Two years in business is the rule, and one to two years can work when you did the same work on payroll first.
❌ Myth: “Only big business owners qualify.”
✅ Fact: Loans start at $100,000. Freelancers, gig workers, and one-truck contractors use these paths every day.
Turned down in Kentucky because of your tax return? Send us your statements. We tell you what they support before you make an offer.
Run My NumbersKentucky Self-Employed Mortgage Frequently Asked Questions
Can I get a mortgage if I’m self employed in Kentucky?
Yes. We qualify Kentucky business owners on 12 or 24 months of bank statements, gross 1099 income, or a CPA-prepared P&L instead of tax returns. The minimum score is 620 for Non-Prime (75% LTV, 43% DTI) and 660 for Expanded Prime (80% LTV, 50% DTI). Two years self-employed is standard.
Do Kentucky occupational license taxes affect my mortgage?
Not on a bank statement or 1099 loan. Local license taxes lower the net profit on your return, but we do not qualify you on net profit. Business statements use deposits times a fixed 50% expense factor, and 1099 loans use 100% of gross 1099 income.
Can I buy a horse property in Kentucky with a bank statement loan?
Yes, if it is 15 acres or less for a primary or second home and it is not a working farm that earns income. Rural property maxes at 80% LTV. A home with a barn for your own horses can fit. A boarding or breeding operation does not.
What documents do I need for a bank statement loan in Kentucky?
We need 12 or 24 months of personal or business bank statements, proof you have been self-employed about 2 years, and proof the business exists. Business statements need at least 25% ownership. If your income is seasonal, plan on 24 months. We do not need your tax returns for a bank statement loan.
What are the requirements for a self-employed mortgage in Kentucky?
Two years of self-employment, a 620 credit score or higher, and proof of income from bank statements, 1099s, or a CPA P&L. Loans run from $100,000 to $3,500,000, with 3 to 6 months of reserves on most Kentucky files.
Is a P&L loan the same as a bank statement loan?
No. A P&L loan uses a 12-month profit and loss statement from a CPA, enrolled agent, or CTEC preparer. You must own at least 50% of the business, and your deposits must land within 35% of the P&L revenue.
Can I use personal bank statements if I pay myself from my business?
Yes. Personal statements count 100% of deposits, averaged over 12 or 24 months. We also look at 2 months of business statements to confirm the business is running. It is often the simplest path for sole owners.
Do self-employed loans have mortgage insurance?
No. These Non-QM programs do not carry mortgage insurance. Escrow for taxes and insurance is required above 85% loan-to-value. Down payment and pricing are set by your score, loan-to-value, and reserves.
Related Pages
About the Author
J.D. Peck is an Area Manager and Mortgage Loan Originator (NMLS #314883) with the JD.Mortgage Team at Paramount Residential Mortgage Group, Inc. (NMLS #75243), based in Colorado Springs. 25+ years, 3,100+ closed loans, Scotsman Guide Top Originator 2026. Lending in 49 states. New York excluded.
Last updated: September 24, 2026. Self-employed program facts sourced from the PRMG Non-QM Income Qualifying Product Profile, 09/17/2026. Loan limits from FHFA 2026 conforming loan limit values. Kentucky tax and property facts from official Kentucky state sources linked above.
Find Out What Your Kentucky Deposits Qualify You For
Send your statements, 1099s, or P&L. We run every path that fits and show you the loan amount, down payment, and program before you write an offer.
More for Kentucky: Kentucky VA loans · Kentucky HELOC
Source: JD.Mortgage Team at PRMG, Kentucky Self-Employed Mortgage: Bank Statement, 1099, and P&L Loans, updated September 2026, https://jd.mortgage/kentucky-self-employed-mortgage/
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