Arkansas State Tax Guide

Bottom Line

Middle-Class Families: Not Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)

Arkansas is a tax-friendly state for retirees, but it's not necessarily very friendly for most other people. 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.

Income taxes are generally above average, too. They're also a bit complicated in Arkansas, as the state uses different rate schedules depending on your income. But there's some recent relief for high earners: For 2021 taxes, the top rate dropped from 6.6% to 5.9%, and it drops again in 2022 (to 5.5%) and 2023 (to 5.3%), with additional rate reductions possible in 2024 and 2025.

On the other hand, Arkansas's property taxes are among the lowest in the nation, and there are no estate or inheritance taxes when you die.

Arkansas Income Taxes

Arkansas 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.

Arkansas Taxation of Social Security Benefits

Social Security benefits are not taxed by the state.

Arkansas 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.

Arkansas 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

Arkansas Real Property Taxes

In Arkansas, the median property tax rate is $620 per $100,000 of assessed home value.

Arkansas Property Tax Breaks for Retirees

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.

Arkansas Motor Fuel Taxes

Gasoline: 24.8¢ per gallon (24.9¢ per gallon effective October 1, 2022).
Diesel: 28.8¢ per gallon (28.7¢ per gallon effective October 1, 2022).

Arkansas Sin Taxes

Cigarettes: $1.15 per pack
Premium cigars (selling for more than $0.76 per cigar): $0.50 each plus 2% of the wholesale price
All other tobacco products: 68% of the manufacturer's price

Beer: $0.24 per gallon
Wine: $1.44 per gallon
Liquor: $2.50 per gallon

Additional alcohol-specific sales taxes are due.

Arkansas Estate and Inheritance Taxes

No estate or inheritance tax.