Taxes in Arkansas
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Arkansas recently lowered its income tax rate, making the state more affordable for retirees to live in.
Below, we explain various Arkansas state taxes affecting retirement income, such as sales tax, inheritance tax, and property taxes. We’ve also provided details about tax credits, exemptions, tax relief programs, and retirement-related tax breaks.
For information regarding taxes in other states, see Retirement Taxes by State.
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Arkansas Tax Rates
|State Sales Tax||6.5%|
|Avg State/Local Sales Tax||9.47%|
|Gas Tax||$0.25 per gallon|
|Diesel Tax||$0.29 per gallon|
|Cigarette Tax||$1.15 per pack|
|Effective Tax Rate:||4.5%|
|Social Security Tax||None|
|Medical/Dental Deduction:||Federal Amount|
|Federal Income Tax Deduction:||None|
Arkansas State Taxes Explained
Arkansas Sales Tax
Arkansas levies a 6.50% (prescription drugs are exempt). Groceries are taxed at the 0.125% Arkansas Reduced Food Tax rate. Local taxes add as much as 6.125% to the state sales tax. The average combined rate is 9.47%.
Arkansas Income Taxes
For the tax year 2022, the state follows two tax rates, 2.55% and 2.98%. The new flat tax of 2.5% will begin in the 2023 tax year, which is filed by April 2024.
Arkansas Property Taxes
Arkansas property taxes are levied by counties, municipalities and school districts. The effective tax rate is 0.41%. Taxpayers who own homes worth the median value of $127,800 pay $798 in property taxes. Assessments are based on 20% of the true market value of the property.
All households are eligible for the Arkansas Homestead Tax Credit of up to $375, regardless of income or age.
The Age 65 or Disabled Homeowner Property Tax Relief program “freezes” the property value to the amount on date the homeowner turned 65 or the date of disability. If a qualified individual buys a new homestead property, they can apply to have the taxable assessed value frozen as of the purchase date. No property improvements that add 25% to the home value are allowed. The taxable value of a homestead property can only increase 5% per year until the property reaches full assessed value—though, does not apply to new construction or newly discovered real estate. The taxpayer will lose the benefit if they make substantial improvements to the home that adds 25% or more to the property value.
Disabled veterans are exempt from property taxes if they receive monthly compensation from the Department of Veterans Affairs. This entitlement extends to surviving spouses and children.
For more information, see the Arkansas Assessment Coordination Division Property Tax relief information or call the assessor’s office in the county of residence.
Arkansas Retirement Taxes
Social Security benefits and military retirement benefits, including survivor benefit plans, are not taxed. The state exempts up to $6,000 of income from private or government employer-sponsored retirement plans. Taxpayers who are 59½ or older qualify for this exemption on traditional IRA distributions.
Arkansas Estate and Inheritance Taxes
Arkansas has no estate tax and no inheritance tax.