State-by-State Guide to Taxes on Retirees
Tool | December 2021

Arkansas State Tax Guide for Retirees

State tax rates and rules for income, sales, property, estate, and other taxes that impact retirees.

Arkansas

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The Bottom Line
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Tax-Friendly

There are a lot of good things to say about the overall state and local tax burden in the Natural State. For instance, Arkansas exempts Social Security benefits and up to $6,000 of retirement income from its state income tax. And, as a plus for veterans, all military pension income is tax-exempt. The state's property taxes are among the lowest in the nation, too.

However, sales taxes in Arkansas—which are levied on both food and clothing—are rather high. According to the Tax Foundation, Arkansas has the third-highest average combined state and local sales tax rate in the nation. But, overall, Arkansas is a tax-friendly state for retirees.

Income Tax Range

Low: 2% (on taxable income from $4,800 to $9,499 for taxpayers with net income less than $23,600), 0.75% (on first $4,799 of taxable income for taxpayers with net income from $23,600 to $84,500), or 2% (on first $4,300 of taxable income for taxpayers with net income over $84,500)

High: 3.4% (on taxable income from $14,300 to $23,599 for taxpayers with net income less than $23,600), 5.9% (on taxable income from $39,700 to $84,500 for taxpayers with net income from $23,600 to $84,500), or 5.9% (on taxable income over $8,500 for taxpayers with net income over $84,500)

Beginning in 2022, the 2% rate will apply to net income of $5,000 to $9,999 for people with net income of $84,500 or less and to the first $4,300 of net income for people with net income greater than $84,500. The top rate will drop to 5.5% and apply to net income of $39,700 to $84,500 for people with net income of $84,500 or less and to the net income over $8,500 for people with net income greater than $84,500.

Beginning in 2023, the top rate is reduced again to 5.3%. If no funds are transferred from the state's Catastrophic Reserve Fund by certain dates, the top rate will drop again to 5.1% for 2024 and to 4.9% for 2025 and thereafter.

Taxation of Social Security Benefits

Social Security benefits are not taxed by the state.

Tax Breaks for Other Retirement Income

Up to $6,000 of income from private or government employer sponsored retirement plans is exempt. Distributions from traditional IRAs also qualify for the $6,000 exemption if the taxpayer is at least 59 1/2 years old.

Military pensions and Railroad Retirement benefits are fully exempt.

Taxpayers age 65 and older who don't claim a retirement income exemption are eligible for an additional $29 tax credit (2021 amount).

Retired law enforcement officers working on cold cases can claim an income tax credit of up to $3,500.

Sales Tax

6.5% state levy. Localities can add as much as 6.125%, and the average combined rate is 9.47%, according to the Tax Foundation.

Groceries: Taxable (0.125% state rate; additional local taxes may apply)
Clothing: Taxable
Motor Vehicles: Taxable (6.5% state rate, or 7% in Texarkana, on purchase price of $4,000 or greater; 3.5% state rate on used motor vehicles priced from $4,000 to $10,000)
Prescription Drugs: Exempt

Real Property Taxes

The taxable assessed value of homes of residents 65 or older, or those who are disabled, can be frozen at the previous year's value unless improvements are made or the property is sold. The taxable value of a homestead property can only increase 5% per year until the property reaches full assessed value.

Annual Car Taxes and Fees

An annual vehicle property tax based on the car's value is imposed. Rates are set at the county level.

Estate and Inheritance Taxes

No estate or inheritance tax.