Arkansas does have a state income tax

Arkansas collects state income tax on wages, self-employment income, investment gains, and retirement distributions. The state uses a progressive tax system with rates that increase as your income rises. For the 2024 tax year, Arkansas income tax ranges from 2% on the lowest bracket to 5.9% on the highest.

Unlike some states that tax only certain types of income, Arkansas taxes most forms of personal income. This means if you work in Arkansas or live there and earn money from any source, you will likely owe state income tax unless you fall into a specific exemption category.

Key Takeaways

  • Arkansas state income tax rates range from 2% to 5.9% depending on your income level, and the state taxes wages, self-employment income, and most retirement distributions.
  • Social Security benefits are not taxed by Arkansas, and military retirement pay receives special treatment under state law.
  • You file Arkansas state taxes using Form AR1000 (Individual Income Tax Return) at the same time you file federal taxes, typically by April 15.
  • Arkansas offers a standard deduction that reduces your taxable income, and the amount depends on your filing status and age.
  • If you work in Arkansas but live in another state, you may owe Arkansas tax on income earned within the state, though your home state may offer a credit to avoid double taxation.

Arkansas income tax brackets and rates for 2024

Arkansas uses six tax brackets. Your rate depends on your filing status (single, married filing jointly, married filing separately, or head of household) and your total income after deductions. The lowest bracket starts at 2% and the highest reaches 5.9%.

The income thresholds that determine which bracket you fall into change each year. For example, a single filer in 2024 might pay 2% on income up to a certain amount, then 3% on the next portion, and so on. The Arkansas Department of Finance and Administration publishes updated brackets each January.

Your actual tax bill depends on three things: your gross income, the deductions you claim, and which bracket your remaining income falls into. Many people pay less than the top rate because only the income in each bracket is taxed at that rate.

What income Arkansas does and does not tax

Taxed by Arkansas: Wages and salaries, self-employment income, interest and dividends, capital gains, rental income, and most retirement account withdrawals (including traditional IRA and 401(k) distributions).

Not taxed by Arkansas: Social Security benefits are completely exempt from Arkansas state tax. Military retirement pay is also exempt. Long-term capital gains may receive preferential treatment depending on the year and your income level — check current rules with the Department of Finance and Administration.

Certain retirement income receives partial exemptions. If you are over 59½ and receive distributions from a may have access to retirement plan, you may exclude up to $6,000 per year from taxation, though this limit and the rules around it can change. Pension income from public employee retirement systems is often fully or partially exempt.

How to file Arkansas state income tax

You file Arkansas state taxes using Form AR1000 (Individual Income Tax Return). You submit it to the Arkansas Department of Finance and Administration by April 15 of the year following the tax year — the same deadline as federal taxes. If you need more time, you can request an extension, which gives you until October 15.

You can file by mail, electronically through the state's online system, or through tax software that supports Arkansas returns. Many people file state and federal taxes together using the same software package. If you use a tax preparer, they will handle the Arkansas return as part of your overall tax filing.

When you file, you will need records of all income you received during the year, documentation of deductions you are claiming, and proof of any taxes already withheld from your paychecks. Your employer provides a W-2 form showing wages and withholding; if you are self-employed, you track income and expenses yourself.

Standard deduction and personal exemptions in Arkansas

Arkansas allows a standard deduction that reduces your taxable income before tax is calculated. The amount varies by filing status and age. For 2024, a single filer under 65 receives one amount; a single filer 65 or older receives a higher amount. Married couples filing jointly receive a larger deduction than single filers.

You can choose to take the standard deduction or itemize deductions (listing specific expenses like mortgage interest, property taxes, and charitable contributions). Most people benefit from the standard deduction because it is simpler and often larger than their itemized deductions would be.

Arkansas also allows a personal exemption for yourself and any dependents you claim, though the value of this exemption has changed over recent years. Check the current year's instructions with Form AR1000 to confirm the exact amount.

What happens if you work in Arkansas but live elsewhere

If you work in Arkansas and earn income there but live in another state, Arkansas will tax that income. You owe tax to the state where you earned the money. However, your home state may also claim the right to tax you as a resident.

To avoid paying tax twice on the same income, most states offer a credit for taxes paid to other states. You file a return in Arkansas showing the income you earned there and the tax you owe, then file a return in your home state and claim a credit for the Arkansas tax you already paid. The credit typically equals the lesser of the tax you paid to Arkansas or the tax your home state would have charged on that income.

The mechanics of this credit vary by state. Some states are more generous than others. If you work across state lines, it is worth reviewing both states' rules or consulting a tax preparer familiar with your situation.

Frequently Asked Questions

Do I have to file an Arkansas return if I did not earn much income?

You must file if your income exceeds the filing threshold for your age and filing status. For 2024, a single person under 65 with less than a certain amount of income may not be required to file, but if taxes were withheld from your paychecks, filing allows you to claim a refund. Check the current year's Form AR1000 instructions for the exact threshold.

What if my employer did not withhold enough Arkansas tax?

When you file your return, you will owe the difference between the tax you should have paid and what was withheld. You can adjust your withholding going forward by submitting a new W-4 form to your employer, or you can make estimated tax payments if you are self-employed. The Arkansas Department of Finance and Administration website has a withholding calculator.

Can I deduct federal income tax from my Arkansas return?

No. Arkansas does not allow you to deduct federal income tax as an itemized deduction. You can only deduct state and local taxes (SALT) up to $10,000 per year if you itemize, and this is a federal limit, not an Arkansas one.

Is there an Arkansas earned income tax credit?

Arkansas does not have its own earned income tax credit. However, if you may have access to for the federal Earned Income Tax Credit (EITC), that reduces your federal tax. Some states add their own credit on top of the federal one, but Arkansas does not currently offer this.

What if I owe Arkansas taxes but cannot pay right away?

Contact the Arkansas Department of Finance and Administration to discuss payment options. The state may allow you to set up a payment plan, pay in installments, or request a short extension. Penalties and interest accrue on unpaid taxes, so reaching out early is better than waiting.