Our comprehensive guide to taxes on retirement income, property and purchases, as well as special tax breaks for seniors, in every state. Go to Retiree Tax Map Arkansas View State Compare List (0) selected | Compare up to 5 The Bottom Line Tax-Friendly The Natural State is a 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 6.5%, although food is taxed at 1.5%. Arkansas's real estate taxes are among the lowest in the nation. State Sales Tax 6.5% (prescription drugs are exempt). City and county sales taxes can add up to another 5.5%; the average local combined rate is 9.3% Food is taxed by the state at 1.5%, and municipalities can add onto that as well. Income Tax Range Low: 0.9% (on up to $4,299 of taxable income)High: 7% (on more than $35,100 of taxable income)Service pay for active-duty members of the armed forces is completely exempt from income tax. Social Security Benefits are not taxed. Exemptions for Other Retirement Income Railroad Retirement benefits 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. IRA distributions qualify for the $6,000 exemption if the taxpayer is 59 1/2 or older. Out-of-state government pensions also qualify for the exemption.IRAsQualifies for exemption of up to $6,000. 401(k)s and other Defined-Contribution Employer Retirement PlansQualifies for exemption of up to $6,000. Private PensionsQualifies for exemption of up to $6,000. Public PensionsQualifies for exemption of up to $6,000. Property Taxes All households are eligible for a homestead tax credit of up to $350. Median property tax on Arkansas's median home value of $109,500 is $674, according to the Tax Foundation.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 andEstate Taxes There is no inheritance tax or estate tax.