Arkansas underwent significant income tax reform from 2021 through 2026, reducing the top rate progressively. The 2026 top income tax rate is 3.7% (cut from 3.9% by a May 2026 special session, HB 1001/SB 1, retroactive to January 1, 2026) for taxable income over $26,400. Arkansas has a 6.5% state sales tax — among the highest in the US. Property taxes average 0.57% effective rate — well below the national average. Social Security is fully exempt for all Arkansans regardless of income, and other pension income has a $6,000 exemption.
At a glance
Key Facts
State Income Tax
3.7% top rate for taxable income above $26,400 (cut from 3.9% by a May 2026 special session, HB 1001/SB 1, retroactive to Jan 1, 2026); major reform from 5.9% in 2021
Sales Tax
6.5% state rate — among the highest in the US; combined state and local rates reach 11.5% in some cities; state sales tax on groceries repealed from January 1, 2026 (local tax still applies)
Property Tax
0.57% average effective rate — below national average; homestead credit available
Social Security
Fully exempt from Arkansas income tax for all residents, regardless of income (Arkansas Code § 26-51-307) — no AGI threshold
Pension Exemption
$6,000 pension/retirement income exclusion for individuals 59½ and older
Estate Tax
No Arkansas estate tax; no inheritance tax
Introduction
Arkansas has been on an aggressive income tax reduction trajectory since 2021 — cutting the top rate from 5.9% in 2021 to 3.9% in 2024 (SB 8, 2023 special session), and then to 3.7% in 2026 via a further special session (HB 1001/SB 1, retroactive to January 1, 2026). This reform makes Arkansas one of the most competitive income tax states in the South, particularly given its already-low property taxes and moderate cost of living.
The trade-off: Arkansas's 6.5% state sales tax (among the highest nationally) and combined local sales tax rates that can reach 11.5% in some areas. Residents pay significant taxes at the checkout counter while enjoying relatively low income and property taxes.
Section 01
Arkansas Income Tax Reform 2021–2026: From 5.9% to 3.7% and Beyond
Arkansas passed sweeping income tax reform beginning in 2021, with the goal of eliminating the income tax long-term. The reform schedule:
Year
Top Income Tax 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)
The 2026 3.7% top rate applies to taxable income above $26,400 for individuals. Lower rates apply to income below that threshold. Arkansas also reduced rates for lower-income brackets over the same period, providing across-the-board relief.
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%
Note: Arkansas's taxable income = federal adjusted gross income minus Arkansas's own standard deduction ($2,470 single / $4,940 MFJ for 2026), before applying these bracket rates. A $29 personal exemption credit is then applied directly against the calculated tax, per filer/dependent.
Social Security Tax in Arkansas
Arkansas fully exempts Social Security benefits from state income tax for all residents, regardless of income (Arkansas Code § 26-51-307) — there is no AGI threshold or phase-out. This is one of the most generous Social Security treatments among states that still levy an income tax; a retiree can have any amount of other income and still owe zero Arkansas tax on Social Security benefits.
Section 02
Arkansas Sales Tax: High State Rate and Local Additions
Arkansas's 6.5% state sales tax is among the highest state-only rates in the US. Combined with local city and county taxes, total rates can reach 11–11.5% in some areas — among the highest total rates nationally.
Combined Sales Tax by City
City
State
Local
Total
Little Rock
6.5%
3.0%
9.5%
Fort Smith
6.5%
4.0%
10.5%
Fayetteville
6.5%
2.0%
8.5%
Springdale
6.5%
4.0%
10.5%
Jonesboro
6.5%
3.0%
9.5%
Since January 1, 2026, Arkansas no longer charges state sales tax on groceries (Grocery Tax Relief Act, Act 1008 of 2025; the former state rate was 0.125%). Local sales taxes on groceries still apply.
Section 03
Arkansas Property Tax, Homestead Credit, and Complete Tax Picture
Arkansas property taxes average approximately 0.57% effective rate — well below the national average of 0.99%. Arkansas assesses residential property at 20% of assessed value, with mill rates varying by county and school district.
Property Tax by County
County
Effective Rate
Annual Tax on $200K Home
Pulaski County (Little Rock)
~0.68%
~$1,360
Washington County (Fayetteville)
~0.63%
~$1,260
Benton County (Bentonville)
~0.54%
~$1,080
Sebastian County (Fort Smith)
~0.64%
~$1,280
Craighead County (Jonesboro)
~0.62%
~$1,240
Arkansas Homestead Credit
Arkansas provides a homestead property tax credit of up to $600 per year (2026) for owner-occupied primary residences. This credit is subtracted from the property tax bill. For a $200,000 home in Little Rock ($1,360 annual tax), the $600 credit reduces the bill to $760 — a 44% reduction. Homeowners age 65+ or totally disabled may qualify for the homestead tax freeze, which limits assessment increases.
Arkansas's ongoing income tax reforms, unique net income calculations, and sales tax complexity are best navigated with professional help. TaxHub connects you with licensed CPAs who understand Arkansas tax law.
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Arkansas has a progressive income tax with a top rate of 3.7% on taxable income above $26,400. Lower rates apply to income below that threshold: 0% up to $5,599, 2% on $5,600–$11,199, 3% on $11,200–$15,999, and 3.4% on $16,000–$26,399. The 3.7% top rate was set by a May 2026 special session (HB 1001/SB 1), retroactive to January 1, 2026, cutting it down from the 3.9% rate in effect since SB 8 (2023). Arkansas has been on a multi-year income tax reduction path, cutting the top rate from 5.9% in 2021 to 3.7% in 2026.
Q
Does Arkansas tax Social Security?
No. Arkansas fully exempts Social Security benefits from state income tax for all residents, regardless of income (Arkansas Code § 26-51-307) — there is no AGI threshold or phase-out at any income level. Arkansas also provides a separate $6,000 pension/retirement income exclusion (combined across all sources) for individuals age 59½ and older on other retirement income, such as IRA and 401(k) distributions.
Q
What is Arkansas's sales tax rate?
Arkansas's state sales tax rate is 6.5% — among the highest state rates in the US. Combined with local city and county taxes, total rates can reach 9.5–10.5% in major cities. However, Arkansas repealed its state sales tax on groceries from January 1, 2026 (local taxes still apply). Restaurant meals and prepared food are taxed at the full rate.
Q
How does Arkansas compare to Tennessee and Oklahoma for taxes?
Tennessee has no income tax on wages (making it the clear winner on income tax), but Tennessee's 7% state sales tax is higher than Arkansas's 6.5%, and Tennessee has no grocery exemption. Oklahoma's income tax (4.5% top rate) is higher than Arkansas's 3.7%, but Oklahoma's sales tax rate is lower (4.5% state). Arkansas's property tax (0.57% effective) is lower than Oklahoma's (0.85%), but Tennessee's average effective property tax (0.52%) is now slightly lower than Arkansas's. Overall, Arkansas competes well on income tax given its rapid reduction trajectory, but the high sales tax remains a disadvantage.
Q
What is the Arkansas homestead property tax credit?
Arkansas provides a homestead property tax credit of up to $600 per year (2026) for owner-occupied primary residences. This credit reduces your annual property tax bill. For a $200,000 home in Pulaski County (annual tax ~$1,360), the $600 credit reduces the bill to $760. There's no income limit for the basic credit. Additional protections are available for seniors 65+ (assessment freeze) and totally disabled homeowners.
Disclaimer:This guide provides general tax information for educational purposes only. Arkansas income tax rates are subject to ongoing legislative changes and revenue trigger conditions. Always consult a qualified Arkansas tax professional for advice specific to your situation.