AN ACT relating to the individual income tax rate.

HB 425 changes Kentucky's individual income tax rates for taxable years beginning on or after January 1, 2026. It establishes a new tax structure: 4% on income up to $100,000, 5% on income between $100,000-$125,000, and 6% on income over $125,000 (with a flat 6% rate for income of $150,000 or more). The bill requires the Office of State Budget Director to annually verify specific fiscal conditions (like budget reserve fund balances) before the legislature can reduce the tax rate, ensuring any change requires legislative approval. This bill directly affects all Kentucky residents who file individual income tax returns for 2026 and beyond.