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Cities and counties across Kentucky are quietly adding new local taxes on everything from your home to your insurance premiums — proof that who you elect locally hits your wallet hardest. By Jesse Brewer, Boone County Commissioner Why local tax decisions matter Our local governments in Kentucky hold more taxing power than most people realize, and maybe it’s time we all start paying closer attention to who we’re electing at the city council and county commission levels. These are the leaders making decisions that reach directly into our pockets, yet too often they escape real accountability. We shouldn’t be taxed on every single thing. Look — most cities are even taxing us on health insurance in Kentucky! The state can’t tax it, but counties and cities sure can. Health insurance is already unaffordable for many, so why on earth is it acceptable to add another tax on top of it? Before squeezing hardworking citizens with property taxes, insurance premium taxes, and hidden local fees, governments should first be looking at how to cut expenses and spend more efficiently. Escrow and hidden taxes If you’re one of the estimated 1.7 million households that own their home in Kentucky, then there is an even better chance you are part of the 1.3 million estimated households that have a mortgage and escrow their taxes and insurance. And why wouldn’t you do that? It’s not only convenient for you but oftentimes your lender will require it. But if you do escrow, then there is a good chance you may not even see your insurance bill with all of its itemizations on it — potentially making you unaware of a hidden insurance premium tax in Kentucky. The law behind it: KRS 91A.080 In 1994 the Kentucky legislature passed a law, now KRS 91A.080, which allows the state, as well as cities and counties, to levy a tax on various insurance products. These include, but are not limited to, life, casualty, fire, vehicle and marine insurance. Translation: if you own a house, car, boat, motorcycle, or a business with errors and omissions insurance, liability insurance, or nearly any other type of policy, it’s subject to this tax. The state does have a few exemptions that cannot be taxed, and those include health insurance, title insurance when you purchase a home, and workers’ compensation insurance. Other than those few, nearly every policy in Kentucky is taxable. How much is the insurance premium tax? The state of Kentucky started the insurance premium tax at 1.5%, but in 2020 the state raised it to 1.8%. The tax was originally created to fund pension liabilities for police and fire. But here’s the kicker: Kentucky is one of just 10 states that also allows counties and cities to levy an additional local insurance tax. These local tax rates vary by jurisdiction, ranging anywhere from 5%–15%, on top of the 1.8% state tax. This means your homeowners insurance, auto insurance, and business policies in Kentucky may all be carrying hidden local taxes. Extra fees on top of taxes As if the taxes weren’t enough, the state also allows insurance companies to tack on a “facilitation fee”  for collecting them. This fee is either: 5% of the tax collected , or 2% of your total premium —whichever is less. Here’s a simple example: If your annual insurance premium is $1,000 and your local tax rate is 5%, you’ll pay $50 in tax. On top of that, the insurance company can charge up to $7.50 as a fee for processing the tax. If both your city and county charge this tax, you’ll pay the fee twice—once for each jurisdiction. Just how widespread is this tax? So just how many taxing authorities have an insurance premium tax in Kentucky? According to research from as recently as 2023, 362 cities and 50 counties in Kentucky levy an insurance premium tax . In Boone County, where I serve as an elected commissioner, we do not have an insurance premium tax of any kind at the county level. If you are interested in seeing a full list of who has a premium tax and what their corresponding rates are, you can visit the Kentucky Department of Insurance website or click here: 2025-2026 Tax Schedule.pdf. The bottom line: Hold local officials accountable At the end of the day, taxes don’t just come from Frankfort or Washington, D.C. — they’re being decided right here at the city and county level in Kentucky. From property to insurance premiums, local governments keep finding ways to dig deeper into the pockets of hardworking Kentuckians. If we want that to change, then we need to start paying attention to who we’re putting in office and holding them accountable. Local elections in Kentucky matter more than most people realize, and the only way to stop hidden taxes from piling up is to demand smarter spending, greater efficiency, and leaders who put citizens first .

Now that Congress has passed the highly controversial and widely debated “One Big Beautiful Tax Bill,” there’s a lot to unpack—most of which I’ll leave to others. While the bill touches on everything from tax-free overtime pay to changes in Medicaid, I want to zero in on just one aspect that impacts real estate and small businesses: accelerated bonus depreciation . If you're a seasoned real estate investor or a small business owner who buys equipment, you’ve probably heard of “accelerated depreciation.” But for those who haven’t, it's an accounting method that allows businesses to deduct a larger portion of an asset’s cost earlier in its useful life—rather than spreading it out evenly over time. In simpler terms: you get bigger tax write-offs sooner, which can significantly boost your cash flow. This strategy gained traction with the 2017 Tax Cuts and Jobs Act and has now returned—at full strength—in the 2025 tax bill. Here’s how it works: You can deduct more of an asset’s value in the early years, which lowers your taxable income right away. That extra cash flow gives business owners more money to reinvest—whether into properties, jobs, or other growth areas. We saw this play out after 2017, especially in the real estate sector. How It Works in Real Estate Let’s say you buy a $1,000,000 investment property in 2025. Under IRS guidelines, 20% of that value is considered the land (which isn’t depreciable), and 80% is the building (which is). So you’re working with $800,000 in depreciable value. Before accelerated depreciation, you’d depreciate that $800,000 over 27.5 years: $800,000 ÷ 27.5 = $29,091/year. In a 25% tax bracket, that’s roughly $7,273 in annual tax savings . But with accelerated bonus depreciation—also called 100% bonus depreciation —you can depreciate certain parts of the property much faster. Things like carpets, appliances, electrical fixtures, cabinets, fencing, and landscaping qualify. That’s where a cost segregation study  comes in. It breaks down the property into components with shorter useful lives, letting you deduct more, faster. Example with Bonus Depreciation Let’s stick with our $1,000,000 property example: $200,000 : Land (not depreciable) $800,000 : Building Of that, about $320,000  can be reclassified via cost segregation and depreciated fully in year one The remaining $480,000  continues on the standard 27.5-year schedule Year One Deductions: $17,454 (standard depreciation on $480,000) $320,000 (bonus depreciation on short-life assets) Total first-year deduction: $337,454 If you’re in a 25% tax bracket, that means over $84,000 in tax savings —just in year one. The Trade-Off The catch? You’re front-loading your deductions. That means in future years, your standard annual depreciation drops to around $17,454 instead of the $29,091 you’d get without bonus depreciation. And when you sell the property, you may face higher depreciation recapture taxes—so it’s smart to consult a tax advisor. Strategies like 1031 exchanges  can help mitigate those consequences. Final Thoughts Bonus depreciation isn't just a tax gimmick—it’s a cash flow accelerator. For real estate investors and small business owners, it frees up money to hire, reinvest, and grow. And frankly, putting more capital in the hands of business owners and job creators sounds like a much better use of funds than letting it sit in the federal treasury. If you own investment property or run a business, now’s a good time to revisit your tax strategy . — Jesse Brewer, Real Estate Investor, Broker, and Boone County Commissioner

When deciding to acquire a new piece of property, it’s really important to understand the financials —that’s the process of underwriting. Not all underwriting is done by banks, and there are varying degrees of how in-depth you can (and should) go. Generally speaking, the larger the property (dollar-value-wise), the more precise your underwriting analysis needs to be in order to avoid costly mistakes down the line. One of the most common mistakes investors make when underwriting a new property acquisition is relying too much on seller-provided data and not enough on their own projections. Not everyone operates a property the same way. This applies not just to expenses, but also to income potential and future plans for the property. While the seller’s data gives you a baseline understanding of the asset, there are several key points you should keep in mind when doing your own underwriting. Property Taxes: The Most Overlooked Expense The biggest and most commonly overlooked cost—with a huge impact on your operating expenses—is property taxes. Sellers will often share what they currently pay, but they rarely mention the reassessment that happens when the property changes hands. How real is this issue? Let’s say you’re buying a property in a district where the tax liability is 2% of the assessed value. The seller purchased the property about seven years ago for $300,000 and pays roughly $6,000 a year. Over the years, they’ve raised rents, and now—thanks to market growth—the property is worth $1,000,000, which is what you're buying it for. Once the sale closes, the property will likely be reassessed based on your purchase price. That $6,000 tax bill you relied on? It becomes $20,000 per year—a $14,000 annual increase, or $1,166 per month in added expense you didn’t anticipate. To put that into perspective: if you’re using a cap rate evaluation (see blog on cap rates for details), and your cap rate is 7%, this unexpected tax jump negatively impacts the valuation by about $200,000. That’s a huge difference in both property value and monthly cash flow. Vacancy Rates: Don’t Fall for “Fully Occupied” Another common mistake I see newer investors make is misunderstanding vacancy. If the property is fully occupied at the time of sale, the seller will often present their financials with $0 in vacancy loss. But over time, maintaining 0% vacancy is impossible—even under the best conditions. To have zero vacancy, every new tenant would need to move in on the exact same day the previous one moves out. Each unit would need to be in perfect condition—no turnover work, no cleanup, no downtime. Even if there’s just one day between tenants, that counts as a vacancy. Depending on your market, vacancy rates will vary, but most banks use a standard 5% (give or take). If you're a solid operator in a decent market, 5% is absolutely achievable—but ignoring it entirely will give you an unrealistic picture of your financials. The Underwriter’s Mistake: Double Counting Vacancy Sticking with the theme of vacancy, there’s another issue that comes up during financing or refinancing—and it’s one that trips up a lot of investors. Often, when submitting numbers to a bank, an investor will report income based on what they actually collected over the last year. That’s great—it reflects real performance, including any vacancy that occurred. But many bank underwriters don’t truly understand how these properties operate. They look at your submitted income, assume it reflects full occupancy, and then apply a standard 5% vacancy deduction on top of it. That means the bank is double-counting vacancy—once in your actuals, and again in their underwriting—which can artificially deflate your projected cash flow. I’ve seen this time and time again, and it can be the difference between getting approved for a loan or not. When submitting your financials, be clear: the income number you’re sharing is based on actual collected rent over the past 12 months. If there was no vacancy during that period, then yes, the bank will still apply their standard vacancy rate—just as you should when evaluating seller financials that claim 0% vacancy. Insurance: Not All Policies Are Created Equal Another overlooked expense in underwriting is property insurance. There are several variables that can significantly affect your premium, and pricing can vary drastically—even for the same property. If you’re taking out a larger mortgage than the seller had, you’ll likely need more coverage, which increases your premium. If you’re using replacement cost coverage and they were using actual cash value, that’s another difference. If they have a larger portfolio and you're newer to investing, they might be receiving volume discounts you won’t qualify for yet. The point is: never assume your insurance cost will match the seller’s. Always reach out to your insurance carrier and get a quote based on your situation. If you plan to shop around, get a declaration page with itemized coverage details so you can request apples-to-apples quotes from other carriers. Property Management: Budget for It Sellers who self-manage often don’t include property management expenses in their numbers. But if you’re a newer investor with a full-time job or just want to be more passive, you’ll probably need to hire a professional property manager. This can become a sticking point when trying to make a deal pencil out. Personally, I always argue that a seller’s time has value, even if they’re not paying someone else to manage the property. But that argument doesn’t go far when it comes to lender underwriting. If the deal only works by excluding a management fee you know you’ll need, it may not be a deal worth doing. At the very least, forecast those expenses into your underwriting. To do that, contact a few local property management companies. Don’t just get their base fee—ask about additional costs for maintenance coordination, leasing fees, admin charges, and anything else they’ll bill for. That’s how you get a real sense of your future operating costs. Income Upside: What the Seller Isn’t Doing So far, we’ve talked mostly about expenses—but don’t overlook income potential. You might be thinking, “How can I collect more income than the current owner?” Simple: many landlords settle into a routine and stop optimizing their properties. They miss out on rent increases, amenity fees, and opportunities to reposition the asset. Look for opportunities to add value through renovations and improvements. New flooring, paint, fixtures—these upgrades can justify higher rents and attract better tenants. And don’t forget other income streams like pet fees, late fees, parking, or even laundry. Capturing rent growth that the previous owner left on the table is one of the most sought-after opportunities in real estate investing. Final Thoughts: Do the Work, Avoid the Regret No matter what type of asset you’re looking at, it’s essential to perform full due diligence. Take the seller’s numbers with a grain of salt—especially on variable expenses—and make sure you recalculate fixed costs like property taxes, insurance, and management. Doing this allows you to make your best offer confidently, knowing you’re buying an investment—not a problem that eats your cash and keeps you up at night.

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