Arkansas Tax Calculator
Arkansas Income Tax
Arkansas has undergone dramatic income tax reform over the past decade, reducing its top rate from 6.9% to just 3.9%. The current system uses a simplified three-bracket graduated structure. The first $4,400 of taxable income is completely exempt (0% rate), income from $4,400 to $8,800 is taxed at 2%, and all income above $8,800 is taxed at the top rate of 3.9%.
This represents one of the most aggressive income tax reduction programs in the country. Governor Sarah Huckabee Sanders signed legislation in 2023 that accelerated the rate reductions, with the goal of making Arkansas more economically competitive with neighboring states. The reforms have been phased in over several years, with the top rate dropping from 5.9% in 2022 to 4.9% in 2023 and ultimately to 3.9%. Arkansas uses its own standard deduction of $2,340 for single filers and $4,680 for married filing jointly.
One notable feature is that Arkansas taxes capital gains at a reduced rate. Net long-term capital gains receive a 50% exclusion, effectively taxing them at half the ordinary income rate. This makes the effective capital gains rate approximately 1.95% at the top bracket, which is very competitive.
| Taxable Income | Rate |
|---|---|
| $0 – $4,400 | 0.0% |
| $4,401 – $8,800 | 2.0% |
| Over $8,800 | 3.9% |
Arkansas Sales Tax
Arkansas imposes a state sales tax of 6.5%, one of the higher state rates in the country. When combined with local city and county taxes, the average combined rate reaches approximately 9.47%, making Arkansas one of the highest sales tax states overall. Some areas have combined rates exceeding 11.5%, particularly in tourist-heavy areas like Eureka Springs and Hot Springs where additional resort taxes apply.
Arkansas does offer some relief on essential items. Groceries are taxed at a reduced state rate of just 0.125% (one-eighth of one percent), though local taxes still apply in full, meaning grocery purchases are typically taxed at 3-4% in most areas. Prescription drugs are exempt from sales tax. Used motor vehicles are subject to the full rate. Arkansas holds periodic sales tax holidays for back-to-school supplies and severe weather preparedness items.
Arkansas Property Tax
Arkansas's effective property tax rate averages approximately 0.62%, well below the national average. Residential property is assessed at 20% of its appraised market value, and the millage rate varies by county and school district. Property tax is a primary funding source for local schools, and rates can vary significantly from one district to another.
Arkansas provides a homestead property tax credit of up to $375 per year for owner-occupied primary residences. Additionally, seniors aged 65 and older (or those who are disabled) can apply for a property tax freeze that locks their assessment at its current level, preventing increases due to rising property values. The combination of low effective rates and these relief programs makes Arkansas relatively affordable for homeowners compared to neighboring states.
Arkansas Tax Reform: A Decade of Rate Cuts
Arkansas's tax reform story is one of the most dramatic in recent American fiscal history. In 2013, the top income tax rate was 6.9% with a complex six-bracket structure. Through a series of legislative sessions, the rate has been cut nearly in half. The key milestones include the 2015 reform that created separate rate tables for lower and higher incomes, the 2019 reform that consolidated brackets and lowered the top rate to 5.9%, and the 2023 legislation that pushed the rate down to 3.9%. Arkansas has funded these cuts primarily through economic growth and broadening the tax base rather than cutting services.
The state's goal is to remain competitive with its no-income-tax neighbor, Texas, while maintaining adequate revenue for public services. Arkansas has successfully attracted business relocations from higher-tax states, particularly in the logistics, manufacturing, and technology sectors centered around the Northwest Arkansas corridor (home to Walmart, Tyson Foods, and J.B. Hunt).
Arkansas vs. Neighboring States
- Texas — Texas has no income tax, still beating Arkansas's 3.9% rate. However, Texas has higher property tax (1.60%) and similar sales tax (8.20% avg). For moderate earners, the gap between Arkansas and Texas has narrowed significantly with the rate reductions.
- Missouri — Missouri has a graduated income tax with a top rate of 4.8% (being reduced to 4.5%). Missouri's combined sales tax averages 8.29%, and property tax is 0.88%. Arkansas now has a lower top income tax rate than Missouri.
- Oklahoma — Oklahoma's top income tax rate is 4.75%, higher than Arkansas's reformed 3.9%. Sales tax is high at 8.98% combined. Property tax is low at 0.87%. Arkansas is now more competitive on income tax.
- Mississippi — Mississippi is reducing its income tax to 4% by 2026, similar to Arkansas. Sales tax is lower at 7.07% combined. Property tax is higher at 0.67%. The two states are converging in overall tax competitiveness.
- Tennessee — Tennessee has no income tax, but its combined sales tax of 9.55% is even higher than Arkansas's. Property tax is similar at 0.64%. Tennessee is better for high earners; Arkansas may be better for consumers paying the lower grocery rate.