Last Updated: April 2026
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, with further reductions to 3.7% scheduled for 2025. 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 (second-highest nationally, behind only California's 7.25%) 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.
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 (scheduled) | 3.7% (revenue-trigger dependent) |
The 2024 3.9% rate applies to net income above approximately $24,300 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.
| Net Income | Rate |
|---|---|
| $0 – $5,099 | 0% |
| $5,100 – $10,299 | 2% |
| $10,300 – $14,299 | 3% |
| $14,300 – $24,299 | 3.4% |
| Above $24,300 | 3.9% |
Note: 'Net income' in Arkansas = federal adjusted gross income minus Arkansas-specific deductions. Arkansas uses a unique 'net income' approach that differs from other states.
Arkansas exempts Social Security benefits from state income tax for individuals with federal AGI below $100,000. For income above $100,000, Social Security benefits are taxable in Arkansas following a modified federal approach. The $100,000 threshold is relatively generous — most middle-income Arkansas retirees qualify for the full exemption.
Arkansas's 6.5% state sales tax is the second-highest state-only rate in the US (behind California's 7.25%). Combined with local city and county taxes, total rates can reach 11–11.5% in some areas — among the highest total rates nationally.
| 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% |
Arkansas has a unique reduced rate for groceries: food for home consumption is taxed at just 0.125% state (essentially exempt) rather than the full 6.5% rate — making it better than Alabama on grocery taxation despite the higher general rate. This was the result of a phased grocery tax reduction program.
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.
| 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 provides a homestead property tax credit of up to $375 per year 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 $375 credit reduces the bill to $985 — a 27% reduction. Homeowners age 65+ or totally disabled may qualify for the homestead tax freeze, which limits assessment increases.
| Category | Arkansas | Tennessee | Oklahoma | Missouri |
|---|---|---|---|---|
| Top income tax rate | 3.9% | 0% (wages) | 4.75% | 4.95% flat |
| State sales tax | 6.5% | 7% | 4.5% | 4.225% |
| Avg property tax | 0.57% | 0.71% | 0.85% | 0.93% |
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Get Expert Tax Help →Arkansas has a progressive income tax with a top rate of 3.9% on net income above approximately $24,300 (2024). Lower rates apply to income below that threshold: 0% up to $5,099, 2% on $5,100–$10,299, 3% on $10,300–$14,299, and 3.4% on $14,300–$24,299. A further reduction to 3.7% was scheduled for 2025, subject to revenue triggers. Arkansas has been on a multi-year income tax reduction path, cutting the top rate from 5.9% in 2021 to 3.9% in 2024.
Arkansas exempts Social Security benefits from state income tax for individuals with federal adjusted gross income (AGI) below $100,000. This generous threshold means most Arkansas retirees qualify for the full exemption. Above $100,000 AGI, Social Security benefits are subject to Arkansas income tax. Arkansas also provides a $6,000 pension/retirement income exclusion for individuals age 59½ and older on other retirement income.
Arkansas's state sales tax rate is 6.5% — the second-highest state rate in the US. Combined with local city and county taxes, total rates can reach 9.5–10.5% in major cities. However, Arkansas taxes groceries at only 0.125% state rate — near-zero — which is better than many high-sales-tax states. Restaurant meals and prepared food are taxed at the full rate.
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 (4.75% top rate) is slightly higher than Arkansas's 3.9%, but Oklahoma's sales tax rate is lower (4.5% state). Arkansas's property tax (0.57% effective) is lower than both Tennessee (0.71%) and Oklahoma (0.85%). Overall, Arkansas competes well on income tax given its rapid reduction trajectory, but the high sales tax remains a disadvantage.
Arkansas provides a homestead property tax credit of up to $375 per year 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 $375 credit reduces the bill to $985. There's no income limit for the basic credit. Additional protections are available for seniors 65+ (assessment freeze) and totally disabled homeowners.