State-by-State Guide to Taxes on Retirees

Printer-friendly version

NICKNAME
The Natural State

BOTTOM LINE: TAX-FRIENDLY
Arkansas is another low-cost, low-tax retirement destination. It exempts Social Security benefits and up to $6,000 of retirement income from its state income tax. All other income is taxed on a sliding scale ranging from 1% to 7%. The statewide sales tax is 6% on nonfood items; food is taxed at 1.5%. Arkansas's real estate taxes are among the lowest in the nation.

STATE SALES TAX
6% (prescription drugs are exempt). Food is taxed at 1.5%; city and county sales taxes can add up to another 5.25%.

INCOME-TAX RANGE
Low: 1% (up to $4,000 of taxable income)
High: 7% (on $33,200 of taxable income or more)

SOCIAL SECURITY
Benefits are not taxed.

EXEMPTIONS FOR OTHER RETIREMENT INCOME
Veterans Administration benefits, Workers' Compensation, Tier I and Tier II Railroad Retirement benefits, and unemployment compensation are exempt. Up to $6,000 in military, civil-service, state and local government, and private pensions is exempt. The exemption refers to income from public or private retirement systems, plans and programs. Because IRA distributions can be included as part of the $6,000 exemption if the taxpayer is 59 1/2 or older, taxpayers receiving an IRA distribution after reaching age 59 1/2 do not have to pay state taxes on the first $6,000 from the account. Out-of-state government pensions also qualify for the exemption.

PROPERTY TAXES
Arkansas property taxes are levied by counties, municipalities and school districts. All households are eligible for a homestead tax credit of up to $350, regardless of income or age. The assessed value is based on 20% of the true market value.

Tax breaks for seniors:The taxable assessed value of homes of residents 65 or older, or those who are disabled, is capped at the previous year's value unless improvements are made or the property is sold.

INHERITANCE AND ESTATE TAXES
There is no inheritance tax and no estate tax.

Visit RetirementLiving.com for a complete rundown of taxes in Arkansas.

States More Tax-Friendly for Retirees

• Our picks of the 10 most tax-friendly states for retirees
• The nine states with no income tax
• The five states with no sales tax
• The five states with the lowest sales taxes (including averages of county/city sales taxes)
• The 36 states that don't tax Social Security benefits

States Less Tax-Friendly for Retirees

• Our picks of the 10 least tax-friendly states for retirees
• The seven states with the highest income tax rate (based on highest tax bracket)
• The five states with the highest sales taxes (including average county/city sales taxes)
• The 22 states that impose their own estate taxes or inheritance taxes