What Is The Cost Of Living In Kentucky Vs. California?

While California has long been considered a dream place to live for many people, as of 2021, more Californians than ever before are leaving the state. Despite is breathtaking coastline, pleasant year-round weather, and employment opportunities, California is known for being expensive.

For this reason, many are opting to move to Kentucky from California to enjoy the state’s cheaper taxes, minimal traffic, conservative views, and overall lower cost of living. Kentucky also boasts a wonderful collection of natural attractions and parks, including the world’s longest cave system – Mammoth Cave National Park. But, when you compare Kentucky and California, how do these two states stack up in terms of cost of living?

The cost of living index in Kentucky is just 83.6, meaning it is about 16% more affordable to live in Idaho than the national average (100). California, on the other hand, has a cost of living index of 149.9, so it is significantly more expensive than both Kentucky and the national average. Kentucky’s median home price is $165,900, which is close to 76% more affordable than the national average of $291,700. Meanwhile, the median home price in California is $684,800 – a staggering 313% higher than Kentucky.

Aside from median housing prices, let’s explore how the cost of living compares in Kentucky vs. California.

When you consider the fact that the median home price in Kentucky is $165,900, it is considerably more affordable to buy a home here than in California. You will also be paying well below the national average. In some cases, you may end up paying quadruple the price for a home in California with the state’s median income approaching $700,000.

A combination of low inventory and slowly climbing mortgage interest rates is influencing a sales boom in Kentucky’s housing market. The demand for homes is widespread, with multiple offers rolling in and houses spending very few days on the market. While the median home price in Kentucky is around $170,000, the statewide average home price has been over $200K for twelve consecutive months.

Although buyers are keeping a close eye on rising mortgage rates, there is still a major demand for properties. Since the start of the pandemic, real estate values have increased by around 25 percent across the nation. While it may be the ideal time to sell a home in both Kentucky and California, competition is stiff and asking prices are higher than normal.

California has been experiencing an affordable housing crisis for many years, which was only exacerbated by the pandemic. This has caused more Californians than ever to leave the state in search of more affordable housing, with many making their way to Kentucky. Although home prices are up in Kentucky, it is still almost four times cheaper to buy a home in Kentucky than California.

There are twenty-one states in the country with average rents below $1,000 a month. With an average monthly rent of just $763, Kentucky has the fourth-lowest rate in the country. Though, there are cities in Kentucky that have average rental prices above $1,000 per month – particularly the major cities like Louisville and Lexington.

States with lower rental rents tend to have lower costs of living, and this rings true for Kentucky. With that said, examine the following table for the average rent in some of the various cities across the state of Kentucky:

By contrast, rental rates are usually higher in the states that have higher incomes. The states with the top five highest average rents in the U.S are also among the top ten highest-earning states. With a statewide average rent of $1,503, California has the second-highest rent in the country. Though, like Kentucky, rental prices vary based on where you live in the state. Some cities in California – such as San Francisco – have the highest recorded average rental rates in the country.

Examine the following table for a more detailed look at the average rental prices you can expect in some of California’s major cities:

Instead of having a progressive tax system that involves higher rates for higher income levels, Kentucky has a flat income tax. Regardless of your income, the state income tax that you pay in Kentucky is 5%. Before 2018, the state had income tax rates ranging from 2% to as much as 6%. Another unique aspect of Kentucky’s tax system is that the state has local income tax rates that are collected by both counties and cities. This local income tax ranges from 0.01% to 2.50% of residential incomes.

California, on the other hand, has a progressive state income tax. The state has ten income tax brackets total, ranging from 1% for the lowest income earners to 13.3% for the highest income earners. California’s top marginal rate is the highest in the nation, but only applies to those that make over $1 million in taxable income.

Because of Kentucky’s local occupational tax system, there are no local sales tax rates in the state. This means that the state’s 6% sales tax rate is the only sales tax you’ll pay, regardless of where you live in Kentucky. However, most goods and services in Kentucky are subject to this rate.

California also collects a sales tax on goods and services purchased in the state. The state is known for having the highest minimum sales tax rate in the country, at 7.25%. Unlike Kentucky, California does collect additional city and county sales taxes. For this reason, most cities in California have much higher sales taxes than the base rate. For example, the sales tax rate in Los Angeles County is 9.50%, but the sales tax rate in Glendale (located in Los Angeles County) is 10.25%.

Kentucky has some of the lowest property tax rates in the country. Homeowners pay an average effective property tax rate of 0.83% (annual taxes as the percentage of their home value). However, this rate may be significantly lower or higher depending on where you live in Kentucky. For example, county rates range from as much as 1.17% in Campbell County to as low as 0.51% in Carter County.

As far as property taxes go in California, the state has an average effective rate of just 0.73%. This is lower than both Kentucky and the national average of 1.07%. Passed in 1978, Proposition 13 established the maximum allowable property tax rate in California at 1% and also limited the increase in assessed home value to 2% each year. This law has helped keep property taxes in California below the national average.

Another important factor to consider when determining the cost of living in Kentucky vs. California is transportation costs. These costs include expenses such as gas prices, new vehicle purchase prices, public transit passes, bus fares, and additional public transportation costs. The transportation costs in Kentucky are about 11% lower than the national average, likely due to the substantially more affordable gas prices.

Additionally, with California’s transportation cost index of 133.1 and Kentucky’s transportation cost index of 89.1, these expenses are almost 50% more in California compared to Kentucky.