State-by-State Guide to Taxes on Retirees
Tool | December 2020

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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Most 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 very tax-friendly state for retirees.

Income Tax Range

Low: 2% (on taxable income from $4,700 to $9,199 for taxpayers with net income less than $22,900), 0.75% (on first $4,699 of taxable income for taxpayers with net income from $22,900 to $82,000), or 2% (on first $4,000 of taxable income for taxpayers with net income over $82,000)

High: 3.4% (on taxable income from $13,900 to $22,899 for taxpayers with net income less than $22,900), 5.9% (on taxable income from $38,500 to $82,000 for taxpayers with net income from $22,900 to $82,000), or 6.6% (on taxable income over $82,000 for taxpayers with net income over $82,000)

(Note: The dollar figures above are for the 2020 tax year, since the amounts for 2021 are not yet available.)

Beginning in 2021, the top rate for taxpayers with higher incomes will drop from 6.6% to 5.9% (on taxable income over $8,000).

For 2020, a "bracket adjustment" of between $40 and $440 is subtracted from the amount of tax due for taxpayers with net income from $82,001 to $87,500 (the income range for the 2021 adjustment is not yet available).

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 (2020 amount).

Sales Tax

6.5% state levy. Localities can add as much as 6.125%, and the average combined rate is 9.48%, 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; effective January 1, 2022, 3.5% state rate on used motor vehicles priced from $4,000 to $10,000)
Prescription Drugs: Exempt

Real Property Taxes

In Arkansas, the median property tax rate is $612 per $100,000 of assessed home value.

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.

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