I researched your question and could not find any
information about KY imposing a tax penalty for early withdrawal from your
401(k). The only penalty will be on your
Federal return.
Instead, the state may not be taxing the withdrawal at
all. There is a pension income exclusion on the KY
state tax return which may exclude some or all of your distribution depending
on the circumstance. TurboTax will take
care of the calculations for you on the state tax return.
For more information, you can take a look at page 22 of the
KY Income Tax Instruction Booklet. Click
here to open that document.
