Cost of Living in Kentucky

Kentucky is synonymous with KFC, bourbon, moonshine, ginger ale and bluegrass music. It’s crazy about horse racing and responsible for various iconic Southern dishes, like the Hot Brown, spoonbread and burgoo. As of July 1, 2023, 4.5 million people live in Abraham Lincoln’s home state. Should you move, too? Learn about the cost of living in Kentucky to see how it stacks up against other places in the United States.

Breaking Down the Cost of Living in Kentucky

According to the Living Wage Calculator, you must earn $15.45 an hour to meet your basic needs in the Derby State. If you have a working spouse, the two of you must individually make $27.66 per hour to support a household with three children.

Know how much you may pay for housing, utilities, food, transportation, health care and taxes.

Housing

The median value of owner-occupied homes in Kentucky is $177,000, representing 68.1% of all housing units in the state. The U.S. Census says you need $1,344 a month to cover various home-related bills, including mortgage payments, utilities, fire, hazard and flood insurance premiums and real estate taxes. If you remove home loan expenses from the picture, the number drops to $440.

Paying 67% more because of a mortgage may convince you to rent instead. Residential tenants in Corn Cracker State spend $902 monthly in gross rent, which includes electricity, gas, water and sewer, and fuels, such as wood and kerosene. The gross rent is 105% more than what people who own their houses free and clear pay but is 33% cheaper than what mortgagors deal with.

Regarding real estate hotness, Kentucky’s housing market has been performing well in the past five years. The median sale price of a home went from $167,900 in December 2018 to 243,400 in December 2023. By the end of 2023, Elizabethtown, Frankfort and Dayton had recorded the fastest-growing sale prices year-over-year.

As of December 2023, Kentucky had been a seller’s market for the past 60 months. Its housing inventory exceeded three months of supply only in January and February 2019.

More people are thinking of moving into the Commonwealth than moving out. Still, demand for housing is cyclical, going up around spring and summer months before decreasing when fall rolls around. Shop around during off-peak seasons to buy a property below the list price.

Despite the growing interest in Kentucky real estate, it’s still in the same league as Iowa, Ohio and Indiana as one of the nation’s most affordable housing markets.

Utilities

Kentucky is energy self-sufficient. It charges one of the lowest electricity prices in the U.S. at 91.2 cents per kilowatt-hour — cheaper than the national average by 19.8 cents. It’s one of the perks of living in the country’s fifth-largest coal producer, accounting for 5% of national production. Coal supplies most of the state’s electricity needs while hydroelectric power covers the remainder.

Regarding natural gas, Kentucky sources most of its supply from the Big Sandy field — the largest in the Appalachian Basin. It also benefits from the interstate pipeline network from the Northeast to the Gulf states.

Electricity and natural gas prices fluctuate when demand is high, especially during winter. Still, the state has access to adequate resources to keep utility costs from going through the roof. Kentuckian utility companies offer payment plans to spread space heating and cooling costs over the year so your bill can stay roughly the same regardless of the season.

Food

Kentucky ranks 30th among the states with the highest average weekly grocery expenditures at $254.57. It’s $15.64 below the national average and $73.32 more affordable than Miami — the most expensive American city for food.

Although cooking at home is relatively budget-friendly in the Bourbon Capital of the World, food is fueling inflation in the South. In December 2023, the region’s consumer price index jumped 3.7% year-over-year, although it fell 0.1% month-over-month.

Kentucky isn’t immune to inflation. Fortunately, the state is an agricultural powerhouse. Half of its land belongs to independent farmers, growing corn, soybeans and other crops, and rearing hogs, broiler chickens and dairy cattle.

There are more than 160 farmers markets across the Commonwealth’s 110 counties. Frequenting any of them allows you to buy straight from the source and fill your grocery bag with affordable, fresh, healthy foods.

Transportation

As in most states, the retail price of gasoline in Kentucky is less than $3 per gallon and cheaper than the national average. The Hemp State also has more than 70 E85 public gas stations. If you drive a compressed natural gas vehicle, you’ll find a few places to refuel in derby country.

Kentucky’s public transit covers all counties, so you can reach any rural area on a bus ride. Fares vary by mode and distance, but the elderly and people with disabilities enjoy discounts.

Health Care

More than 6% of Kentucky residents under 65 are uninsured. This number reached 18% in 2020 when health care affordability became a significant concern after many lost their health insurance due to unemployment. 

Luckily, the Inflation Reduction Act of 2022 helps lower the state’s health insurance premiums and prescription drug costs. The law expands health coverage to thousands of locals. 

Taxes

Kentucky has a flat income tax rate of 4.5%, which can shrink by 0.5% when revenue and budget conditions permit it. Some local government entities impose an occupational license payroll tax on wages.

The state’s 6% sales tax exempts clothing and prescription drugs. This tax won’t apply when buying a car if you pay the 6% motor vehicle usage tax.

If you own a property in Kentucky, you must pay property taxes at the state and local levels. The state government charges a real property tax of 12.2 cents per $100 of assessed valuation. On the other hand, local property taxes differ from one county to another.

If you own a private vehicle, the Commonwealth’s coffers swell by 44.40 cents for every gallon of gasoline you put in the tank. Kentucky generates revenue from tobacco, vape and alcohol products and taxes inheritances by up to 16%.

Is Kentucky an Affordable State?

The cost of living in Kentucky is cheaper than the national average in most metrics. Although your lifestyle ultimately determines your living expenses, you don’t need to live modestly to enjoy a high standard of living in the Bluegrass State.