Bottom Line
Middle-Class Families: Mixed (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)
Arkansas is a tax-friendly state for retirees, but it's not always very friendly for other people. Sales taxes in Arkansas — which are levied on both food and clothing — are rather high. According to the Tax Foundation, Arkansas has the third-highest average combined state and local sales tax rate in the nation.
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Income taxes are generally above average, too. They're also a bit more complicated in Arkansas, since the state uses different rate schedules depending on your income. But there's some recent relief for high earners: Starting with the 2022 tax year, the top rate dropped from 5.9% to 4.9%.
On the other hand, Arkansas's property taxes are among the lowest in the nation, and there are no estate or inheritance taxes when you die.
Arkansas Income Taxes
Arkansas Income Tax Range
Low: 2% (on taxable income from $5,000 to $9,999 for taxpayers with net income of $84,500 or less, and on the first $4,300 of net income for taxpayers with net income over $84,500)
High: 4.9% (on taxable income from $23,600 to $84,500 for taxpayers with net income of $84,500 or less, and on taxable income over $8,500 for taxpayers with net income over $84,500)
Arkansas Taxation of Social Security Benefits
Social Security benefits are not taxed by the state.
Arkansas Tax Breaks for Other Retirement Income
Up to $6,000 of income from private or government employer sponsored retirement plans is exempt. Distributions from traditional IRAs also qualify for the $6,000 exemption if the taxpayer is at least 59½ years old.
Military pensions and Railroad Retirement benefits are fully exempt.
Taxpayers age 65 and older who don't claim a retirement income exemption are eligible for an additional $29 tax credit (2021 amount).
Retired law enforcement officers working on cold cases can claim an income tax credit of up to $3,500.
Arkansas Sales Tax
6.5% state levy. Localities can add as much as 6.125%, and the average combined rate is 9.47%, according to the Tax Foundation.
- Groceries: Taxable (0.125% state rate; additional local taxes may apply)
- Clothing: Taxable
- Motor Vehicles: Taxable (6.5% state rate, or 7% in Texarkana, on purchase price of $4,000 or greater; 3.5% state rate on used motor vehicles priced from $4,000 to $10,000)
- Prescription Drugs: Exempt
Arkansas Real Property Taxes
In Arkansas, the median property tax rate is $572 per $100,000 of assessed home value.
Arkansas Property Tax Breaks for Retirees
The taxable assessed value of homes of residents 65 or older, or those who are disabled, can be frozen at the previous year's value unless improvements are made or the property is sold. The taxable value of a homestead property can only increase 5% per year until the property reaches full assessed value.
Arkansas Motor Fuel Taxes
Gasoline: 24.8¢ per gallon (24.9¢ per gallon effective October 1, 2022).
Diesel: 28.8¢ per gallon (28.7¢ per gallon effective October 1, 2022).
Arkansas Sin Taxes
Cigarettes: $1.15 per pack
Premium cigars (selling for more than $0.76 per cigar): $0.50 each plus 2% of the wholesale price
All other tobacco products: 68% of the manufacturer's price
Beer: $0.24 per gallon
Wine: $1.44 per gallon
Liquor: $2.50 per gallon
Additional alcohol-specific sales taxes are due.
Arkansas Estate and Inheritance Taxes
No estate or inheritance tax.
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