Taxes in Arkansas: State Tax Guide 2026
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Taxes in Arkansas: State Tax Guide 2026
Tax information is for educational purposes only and does not constitute tax advice. Consult a licensed tax professional for your specific situation.
Arkansas has been aggressively cutting its income tax rate in recent years, reducing the top rate from 6.60% to ~3.90% for 2026 as part of a multi-year reform effort. The state combines this with above-average sales taxes (including a full tax on groceries at the state level, though at a reduced rate) and below-average property taxes. The Natural State’s improving tax competitiveness is part of its pitch to attract both businesses and new residents, particularly to the booming Northwest Arkansas corridor.
Arkansas Income Tax Rates (2026)
Arkansas has streamlined its income tax into fewer brackets with a declining top rate:
| Tax Rate | Taxable Income Range |
|---|---|
| 2.00% | $0 – ~$4,400 |
| ~3.90% | Over ~$4,400 |
The top rate has been declining: 5.50% in 2022, 4.70% in 2023, 4.40% in 2024, ~3.90% projected for 2026. Arkansas previously had a complex system with separate rate tables for different income levels; the reforms have simplified it substantially.
Arkansas’s standard deduction is ~$2,340 for single filers and ~$4,680 for married filing jointly. A personal tax credit of ~$29 per exemption applies.
Sales Tax
| Component | Rate |
|---|---|
| State base rate | 6.50% |
| Average combined (state + local) | ~9.46% |
| Highest combined rate | ~12.625% |
Arkansas allows cities and counties to add significant local sales taxes. Little Rock’s combined rate is approximately ~9.625%. Some small jurisdictions push above 12%.
Groceries: Arkansas taxes groceries at a reduced state rate of 0.125% (essentially eliminated at the state level after a phased reduction). Local sales taxes still apply to groceries, so the combined grocery rate in most areas is ~3%–6%.
Exempt from sales tax: Prescription medications.
Property Tax
| Metric | Amount |
|---|---|
| Average effective rate | ~0.62% |
| National average | 0.99% |
Arkansas property taxes are among the lowest in the nation. The state constitution limits the total state property tax to 5 mills. Local governments add their own levies, but the total remains low.
Assessment ratio: Residential property is assessed at 20% of appraised value.
Homestead credit: A property tax credit of up to ~$375 is available for owner-occupied homes. This credit is applied against the homestead property tax.
Amendment 79 cap: Annual increases in the assessed value of homesteaded property are limited to 5% per year for property tax purposes (10% for non-homestead), regardless of actual market appreciation.
Example: A home appraised at $200,000, assessed at 20% = $40,000. At a typical millage rate of ~55 mills, the annual property tax is approximately ~$1,825 before the homestead credit.
Other Taxes
- Estate and inheritance tax: Arkansas does not impose a state estate tax or inheritance tax.
- Capital gains: Taxed as ordinary income at the reduced state rates. Arkansas offers a 50% exclusion on net capital gains from the sale of qualifying Arkansas assets.
- Fuel tax: ~$0.246 per gallon.
- Cigarette tax: ~$1.15 per pack.
- Alcohol tax: ~$2.50 per gallon of spirits.
- Severance tax: 5% on natural gas and oil production; other rates apply to timber, bromine, and other minerals.
- Tourism tax: A 2% state tourism tax on short-term rentals and lodging.
- No local income taxes.
Tax Breaks and Credits
- No Social Security tax: Arkansas does not tax Social Security benefits.
- Retirement income exclusion: Up to ~$6,000 per person of retirement income from pensions, annuities, 401(k), and IRA distributions can be excluded.
- Military retirement: Fully exempt from Arkansas income tax (enacted 2023).
- Capital gains exclusion: 50% of net capital gains from the sale of qualifying Arkansas-based assets can be excluded from income.
- Arkansas EITC: Not currently offered.
- Homestead property tax credit: Up to ~$375 for owner-occupied primary residences.
- 529 plan deduction: Up to
$5,000 per year ($10,000 for married filing jointly) for contributions to any state’s 529 plan. - InvestArk tax credit: Tax credits for investments in Arkansas businesses, particularly in distressed areas.
Key Takeaways
- Arkansas has cut its top income tax rate to ~3.90% for 2026, one of the sharpest reductions among all states in recent years
- Combined sales tax rates average ~9.46% and can exceed 12%, making consumption taxes the primary burden
- Property taxes are low at ~0.62%, with constitutional caps on annual assessment increases
- Social Security and military retirement pay are fully exempt from state tax
- The 50% capital gains exclusion for Arkansas assets is a notable benefit for in-state investors
Next Steps
- Compare Arkansas to other states at State Income Tax Comparison: All 50 States Ranked
- Understand your federal obligation with the Federal Income Tax Guide 2026
- Make sure you claim everything you can — Tax Deductions You’re Probably Missing
- Ready to file? See How to File Your Taxes Step by Step
Tax information is for educational purposes only. Consult a licensed tax professional.