Arkansas does have a state income tax

Arkansas taxes wages, salaries, investment income, and most other forms of personal income. The state uses a progressive tax system, meaning the rate increases as your income rises. For the 2024 tax year, Arkansas has six tax brackets ranging from 2% on the lowest incomes to 5.9% on the highest.

Unlike some states that tax only certain types of income, Arkansas taxes nearly all income sources the same way. This includes W-2 wages from employment, self-employment income, interest and dividends, capital gains, and retirement distributions. The main exceptions are specific items the state or federal government has carved out by law.

You file Arkansas state income tax on Form AR1000 if you lived in the state for any part of the tax year and earned income above the filing threshold. The filing threshold depends on your age and filing status but generally starts around $2,500 for single filers under 65.

Key Takeaways

  • Arkansas taxes personal income at rates from 2% to 5.9% depending on how much you earn, with six separate tax brackets.
  • The state taxes wages, self-employment income, investment gains, and retirement withdrawals using the same tax brackets.
  • You must file an Arkansas state return if you lived in the state during the year and earned income above the threshold for your age and filing status.
  • Arkansas allows a standard deduction that reduces the income you actually pay tax on, and the amount varies by age and filing status.
  • Some income sources, such as certain federal benefits and specific types of retirement income, are excluded from Arkansas taxation by state or federal law.

The six tax brackets and how they work

Arkansas divides taxable income into six brackets. Each bracket has its own rate, and you only pay that rate on income that falls within that specific range. For example, if you are single and your taxable income is $10,000, you do not pay 5.9% on all of it — you pay the lower rates on the portions that fall in the lower brackets.

The exact income ranges for each bracket change slightly each year because they are adjusted for inflation. For 2024, the brackets for single filers start at 2% on income up to roughly $4,300, then move to 4% on the next portion, and continue upward. The highest bracket of 5.9% applies to income above a threshold that varies by year and filing status.

Married couples filing jointly have different bracket thresholds than single filers, and head-of-household filers have their own thresholds as well. The Arkansas Department of Finance and Administration publishes the exact bracket amounts each year on their website, and tax software automatically applies the correct brackets based on your filing status.

Standard deduction and what it reduces

Before you calculate tax on your income, Arkansas allows you to subtract a standard deduction. This amount reduces your taxable income, meaning you only pay tax on what remains. The standard deduction is not the same for everyone — it depends on your age and filing status.

For 2024, the standard deduction for a single filer under age 65 is $2,500. If you are 65 or older, the standard deduction is higher. Married couples filing jointly have a larger standard deduction than single filers, and head-of-household filers fall somewhere in between. These amounts also adjust slightly each year.

You can choose to take the standard deduction or itemize deductions instead, but most Arkansas residents benefit from the standard deduction. Itemizing means listing out specific expenses like mortgage interest or charitable donations, which requires more record-keeping and is only worthwhile if your total deductions exceed the standard deduction amount.

Income sources that Arkansas does not tax

Arkansas excludes certain types of income from state taxation. Social Security benefits are not taxed by Arkansas, even though they may be taxed at the federal level depending on your total income. Some military pensions and federal employee pensions receive special treatment under state law.

Certain retirement income is also excluded. For example, distributions from a Roth IRA are not taxed by Arkansas because they represent money you already paid tax on when you earned it. Some types of annuity income and distributions from certain may have access to retirement plans may also be excluded, though the rules depend on when the plan was established and what type of plan it is.

Interest from U.S. Treasury bonds and certain other federal securities is excluded from Arkansas taxation. Some types of insurance proceeds and gifts are also not taxed. The state publishes a full list of excluded income types in the instructions to Form AR1000, which you can find on the Arkansas Department of Finance and Administration website.

How to file Arkansas state income tax

You file Arkansas state income tax using Form AR1000, the individual income tax return. You can file by paper or electronically. Most people file electronically because it is faster and reduces errors — the state accepts e-filed returns within days, while paper returns take several weeks to process.

If you file electronically, you can use tax software that supports Arkansas returns, or you can use a tax professional. The Arkansas Department of Finance and Administration maintains a list of approved software providers on their website. If you file by paper, you mail Form AR1000 and any supporting schedules to the address listed in the form instructions.

The filing important date is the same as the federal important date, which is usually April 15. If April 15 falls on a weekend or holiday, the important date moves to the next business day. You can request an extension to file, which gives you until October 15 to submit your return, but any tax you owe is still due by the original April important date or you will owe interest and penalties.

Deductions and credits that reduce what you owe

Beyond the standard deduction, Arkansas offers several tax credits that directly reduce the amount of tax you owe. A tax credit is different from a deduction — a credit reduces your tax dollar-for-dollar, while a deduction reduces the income you pay tax on.

Arkansas offers a dependent exemption credit, a child and dependent care credit, and a property tax credit for certain homeowners. The state also has credits for education-related expenses, such as contributions to a 529 college savings plan. Some credits are refundable, meaning if the credit is larger than your tax bill, you receive the difference as a refund. Others are non-refundable, meaning they can only reduce your tax to zero.

The rules for each credit vary, and not everyone is may have access to to every credit. Your income level, filing status, and the type of expense all determine whether you can claim a credit. Tax software and the Form AR1000 instructions list all available credits and the requirements for each one.

What happens if you move to or from Arkansas

If you moved to Arkansas during the year, you are a part-year resident and must file an Arkansas return for the months you lived there. You report only the income you earned while you were an Arkansas resident. If you moved out of Arkansas, you file a part-year return reporting income only for the months before you left.

If you worked in Arkansas but lived in another state, you may owe Arkansas tax on the income you earned in the state, even though you were not a resident. This is called nonresident income tax. However, you can usually claim a credit on your home state return for taxes paid to Arkansas, so you do not pay tax twice on the same income.

Military members stationed in Arkansas may have different rules depending on their home state and the terms of the Servicemembers Civil Relief Act. If you are military, check with a tax professional or the Arkansas Department of Finance and Administration about your specific situation.

Frequently Asked Questions

Does Arkansas tax retirement income differently than wages?

Arkansas taxes most retirement income the same way it taxes wages — using the same tax brackets and rates. However, some types of retirement income are excluded entirely, such as Social Security benefits and certain military pensions. Roth IRA distributions are also not taxed. The type of retirement account and how you withdraw the money determine whether it is taxed.

What is the difference between the standard deduction and a tax credit?

The standard deduction reduces the amount of income you pay tax on. A tax credit reduces the actual tax you owe, dollar for dollar. A $2,500 standard deduction might save you $150 in tax, but a $150 tax credit saves you exactly $150. Credits are more valuable than deductions of the same amount.

Do I have to file an Arkansas return if I only earned a small amount of income?

You must file if your income exceeds the filing threshold for your age and filing status. For 2024, the threshold for most single filers under 65 is around $2,500. If you earned less than that, you generally do not have to file. However, filing may be worth it if you had taxes withheld from your paychecks, because you could receive a refund.

Can I claim a dependent on my Arkansas return?

Yes, Arkansas allows you to claim dependents on your state return. You use the same dependents you claim on your federal return. Arkansas offers a dependent exemption credit for each dependent you claim, which reduces your tax owed. The credit amount and any income limits depend on the tax year.

What if I owe Arkansas income tax but cannot pay it all at once?

The Arkansas Department of Finance and Administration offers payment plans for taxpayers who cannot pay their full balance by the important date. You can set up a plan online through the department's website, or contact them by phone to arrange payments. Interest and penalties continue to accrue on unpaid tax, so paying as soon as you can reduces the total amount you owe.