Arkansas has aggressively cut its income tax rate: from 5.9% top rate in 2021 down to 3.7% today, most recently via a May 2026 special session (HB 1001/SB 1) retroactive to January 1, 2026. Social Security is fully exempt at any income level. Military retirement income is fully exempt. Arkansas's graduated brackets start at 0% and reach the 3.7% top rate above $26,400 in taxable income — combined with the standard deduction, the lowest earners owe no Arkansas tax at all. Arkansas has among the lowest property taxes in the South (~0.57% effective rate). Moving to Texas (no income tax) saves the full income tax bill, though Texas's higher property taxes partly offset the savings for homeowners.
At a glance
Key Facts
Arkansas Income Tax Rate (2026)
Graduated, 5 brackets on Arkansas taxable income (single): 0% on $0–$5,599; 2% on $5,600–$11,199; 3% on $11,200–$15,999; 3.4% on $16,000–$26,399; 3.7% above $26,400. Cut from 3.9% by a May 2026 special session (HB 1001/SB 1), retroactive to January 1, 2026. At $100,000 gross income, Arkansas state tax is approximately $3,212 (3.21% effective rate).
Social Security Exemption
Arkansas does NOT tax Social Security benefits — 100% exempt at all income levels.
Military Retirement Exemption
Arkansas fully exempts military retirement income from state income tax — a significant benefit for retirees near Little Rock AFB, Fort Smith, and the National Guard community.
Low-Income Exemption
Arkansas's 0% bracket covers the first $5,600 of taxable income, and Arkansas's own standard deduction ($2,470 single) is subtracted before brackets apply — combined, a single filer with roughly $8,000 or less in gross income owes no Arkansas income tax at all. A $29 personal exemption credit (applied directly against tax owed, not as a deduction) pushes the true zero-liability point slightly higher.
No Estate or Inheritance Tax
Arkansas has no estate tax and no inheritance tax.
Property Tax
Arkansas property tax effective rate approximately 0.57% — well below the national average of 0.99%. Homestead credit of up to $375/year off property tax for primary residences. Over-65 or disabled homeowners: additional homestead tax freeze available, limiting assessment increases.
Introduction
Arkansas has undergone one of the most rapid income tax transformations of any Southern state. Through a series of legislative tax cuts starting in 2021, Arkansas reduced its top income tax rate from 5.9% down to 3.7% today — its most recent cut, from 3.9% to 3.7%, came via a May 2026 special session (HB 1001/SB 1), retroactive to January 1, 2026. Combined with full Social Security and military retirement exemptions, Arkansas has become significantly more tax-competitive in the South. This guide covers Arkansas's reformed tax structure and what departing residents need to know.
Section 01
Arkansas's Tax Reform Journey and Current Structure
Arkansas's income tax has been dramatically reformed since 2021:
The Rate Reduction Timeline
Year
Arkansas Top Rate
2021
5.9%
2022
5.5%
2023
4.7%
2024
3.9%
2025
3.9% (no change)
2026
3.7% (May 2026 special session, HB 1001/SB 1, retroactive to Jan 1, 2026)
Each cut was enacted through specific legislation, part of a consistent multi-year push to reduce Arkansas's income tax burden. The 2026 3.7% top rate applies to taxable income above $26,400 for individuals.
Arkansas Income Tax Brackets 2026
Taxable Income
Rate
$0 – $5,599
0%
$5,600 – $11,199
2%
$11,200 – $15,999
3%
$16,000 – $26,399
3.4%
Above $26,400
3.7%
Arkansas's taxable income = federal adjusted gross income minus Arkansas's own standard deduction ($2,470 single / $4,940 MFJ for 2026), before these bracket rates apply. A $29 personal exemption credit is then applied directly against the calculated tax, per filer/dependent — not as a deduction from income.
Arkansas vs Tennessee and Texas
For Arkansas residents comparing neighboring no-income-tax states:
Tennessee: No income tax (Hall Tax eliminated 2022). Tennessee's combined sales tax rate is among the highest nationally (~9.25–10%). Property tax in Tennessee: approximately 0.52% effective (similar to Arkansas). For wage earners, Tennessee is clearly lower on income tax but roughly equivalent on property and sales tax.
Texas: No income tax. Texas property tax: approximately 1.40% effective — significantly higher than Arkansas's ~0.57%. For a $300,000 home: Texas costs approximately $4,200/year in property tax vs Arkansas's approximately $1,710. For an Arkansas resident earning $150,000, the income tax savings from moving to Texas: approximately $5,062/year; the property tax cost: approximately $2,490 more per year. Net annual savings from Arkansas to Texas: approximately $2,572 at $150K income on a $300K home.
Arkansas Capital Gains Treatment
Arkansas taxes capital gains at regular income tax rates — same as ordinary income. There is no preferential rate for long-term capital gains at the Arkansas level (though Arkansas does offer a 50% exclusion on gains from assets held 3+ years). The federal capital gains preference (0%/15%/20%) still applies; Arkansas just adds its regular rate on top of the taxable portion. For a retiree recognizing a large capital gain from a real estate sale, the Arkansas component applies at the applicable bracket rate, up to 3.7% at the margin. Moving to Tennessee or Texas before a major capital gain saves this Arkansas-level tax entirely.
Section 02
Arkansas Residency Exit Rules
Arkansas uses standard domicile-based residency:
Arkansas Residency
Arkansas defines a resident as someone domiciled in Arkansas or someone who maintains a permanent place of abode in Arkansas for a complete taxable year. Arkansas does not have a specific published day-count threshold beyond domicile — the state uses common law domicile principles. To exit Arkansas residency: establish domicile in the new state (driver's license, voter registration, vehicle registration, estate documents). Arkansas does not have a reputation for aggressive post-departure audits.
Arkansas Sales Tax: Regional Context
Arkansas has a 6.5% state sales tax, with local taxes adding to combined rates of 8–12% in some areas (Fayetteville combined ~8.5%; Little Rock ~8.625%). Arkansas taxes groceries at a reduced 0.125% state rate (food and food ingredients) — effectively near zero at the state level for groceries, with local taxes applying. This reduced grocery rate is a meaningful benefit for families. The overall sales tax burden in Arkansas (excluding groceries) is above the national average but comparable to Tennessee and higher-tax Southern neighbors.
Arkansas domicile changes, capital gains timing, partial-year returns, and retirement income planning require CPA guidance. TaxHub connects you with state tax specialists.
⚠ Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Will Arkansas's income tax rate continue to decrease?
Arkansas has already cut its top rate further than most residents realize: from 3.9% (2024-2025) down to 3.7%, via a May 2026 special session (HB 1001/SB 1) retroactive to January 1, 2026. Arkansas has publicly stated a long-term goal of eliminating the income tax entirely, though the timeline for full elimination is indefinite. Each rate reduction requires specific legislation, and the fiscal environment, state revenue performance, and political conditions will determine whether further reductions occur. Arkansas's rate reduction trajectory since 2021 (5.9% → 5.5% → 4.7% → 3.9% → 3.7%) has been consistent and rapid — significantly faster than most other states. Residents planning major income events (capital gains, Roth conversions) should evaluate whether waiting for further Arkansas rate reductions vs moving to a no-income-tax state makes more financial sense.
Q
How does Arkansas's NWA (Northwest Arkansas) region compare to nearby Missouri for residents?
Northwest Arkansas (Fayetteville-Springdale-Rogers-Bentonville metro — home to Walmart's headquarters and a booming tech/logistics economy) borders southern Missouri. The tax comparison: Arkansas top rate 3.7% vs Missouri top rate 4.7% (above $9,999 single). Arkansas is meaningfully lower. No Arkansas city income taxes vs Missouri's St. Louis 1% / Kansas City 1% (which don't apply in NW Arkansas anyway). Property taxes: Arkansas ~0.57% vs Missouri ~0.89% — Arkansas significantly lower. NW Arkansas is a net winner vs Missouri on combined state income and property taxes. However, many NW Arkansas workers are highly compensated (Walmart and Walmart-adjacent ecosystem salaries), making the Texas comparison (no income tax) more relevant for high earners.
Q
Does Arkansas have any special tax provisions for small business owners?
Arkansas does not have a specific small business income deduction similar to Iowa's 50% deduction. Pass-through business income (S-corps, partnerships, sole proprietors) is taxed at the regular Arkansas individual income tax rates (top 3.7%). Arkansas does provide a Business and Job Creation Tax Credit for qualifying businesses creating jobs, but this is a business-level credit rather than an individual income deduction. Arkansas's relatively low 3.7% rate on pass-through income is competitive in the region. Arkansas conforms generally to the federal QBI §199A deduction — reducing federal taxable income by up to 20% for qualified business income, which also reduces Arkansas taxable income (as Arkansas starts from federal adjusted gross income).
Disclaimer:This guide provides general tax information for educational purposes only. Arkansas income tax rates are subject to annual legislative adjustment. This is not tax advice. Consult a CPA for Arkansas-specific tax planning.