Arkansas does have a state income tax

Arkansas taxes wages, salaries, investment income, and business profits. Unlike some states that have no income tax at all, Arkansas residents and anyone earning money within the state must file a state return if their income exceeds the filing threshold. The tax rate varies based on your income level — Arkansas uses a progressive tax system with brackets that change each year.

You will owe Arkansas state income tax on money you earn from a job, self-employment, rental property, dividends, interest, and capital gains. The state also taxes retirement income in some cases, though certain pensions and retirement accounts receive partial or full exemptions depending on your age and the source of the income.

Key Takeaways

  • Arkansas has state income tax on wages and most other income sources, with tax rates ranging from 2% to 5.75% depending on your income bracket.
  • You must file an Arkansas state return if your income exceeds the annual threshold, which varies by filing status and changes each year.
  • Social Security benefits are not taxed by Arkansas, and certain military pensions receive preferential treatment under state law.
  • If you work in Arkansas but live in another state, you may owe Arkansas tax on wages earned within the state.
  • The Arkansas Department of Finance and Administration processes state returns and handles tax disputes.

Arkansas tax brackets and rates for 2024

Arkansas income tax brackets are adjusted annually for inflation. For the 2024 tax year, the state uses six tax brackets ranging from 2% on the lowest income to 5.75% on the highest. The exact income thresholds depend on your filing status — single, married filing jointly, married filing separately, or head of household.

Your tax bracket is determined by your total taxable income after you subtract the standard deduction or itemize deductions. The standard deduction in Arkansas also changes each year. You can find the current year's brackets and standard deduction amounts on the Arkansas Department of Finance and Administration website or in the instructions that come with the state tax form.

Because the brackets shift annually, your tax liability can change even if your income stays the same. This is why reviewing your withholding each year matters — if too little is being withheld from your paycheck, you may owe money when you file.

Who must file an Arkansas state return

You must file an Arkansas return if your gross income exceeds the filing threshold for your filing status. The threshold varies: a single filer has a different minimum than a married couple filing jointly. If you are claimed as a dependent on someone else's return, the threshold is lower.

Even if your income falls below the threshold, you should file if you had Arkansas income tax withheld from your paychecks or made estimated tax payments. Filing allows you to recover any overpayment as a refund. Self-employed people and business owners must file if their net profit from self-employment is $400 or more, regardless of the income threshold.

If you worked in Arkansas but lived in another state, you owe Arkansas tax on the income you earned within the state. You will file both an Arkansas return and a return in your home state, though most states offer a credit to prevent double taxation.

Income that Arkansas does not tax

Arkansas excludes Social Security benefits from state income tax entirely. If Social Security is your only income, you will not owe Arkansas state tax. Military pensions also receive special treatment — active-duty military members and veterans may exclude a portion of their military retirement pay, though the amount depends on when you served and your age.

Certain other retirement income receives preferential tax treatment. Public employee pensions (from teachers, police, firefighters, and other government workers) are partially excluded from taxation if you meet age and service requirements. The exact exclusion amount varies by pension type and your age at retirement.

Interest from U.S. Treasury bonds and certain other federal securities is exempt from Arkansas state tax. However, interest from municipal bonds issued by other states is taxable in Arkansas, though interest from Arkansas municipal bonds is not.

How to file your Arkansas state return

You can file your Arkansas return using paper forms or tax software. The main form is the AR1000, the individual income tax return. You will also need supporting schedules depending on your income sources — Schedule A for itemized deductions, Schedule C for self-employment income, Schedule D for capital gains, and others.

Paper forms and instructions are available from the Arkansas Department of Finance and Administration website. You can also request them by mail or phone. If you use tax software, the program will guide you through the questions and calculate your tax automatically, then file electronically on your behalf.

The filing important date is April 15 unless that date falls on a weekend or holiday, in which case it moves to the next business day. If you cannot file by the important date, you can request an extension, though an extension to file is not an extension to pay — you still owe the tax by April 15.

Withholding and estimated payments

If you work as an employee, your employer withholds Arkansas state income tax from your paycheck based on the AR4 form you complete when hired. The amount withheld depends on your income, filing status, and the number of allowances you claim. If too little is withheld, you will owe tax when you file; if too much is withheld, you will receive a refund.

Self-employed people and business owners do not have withholding taken from their income. Instead, they must make quarterly estimated tax payments to Arkansas if they expect to owe $500 or more in state tax for the year. Estimated payments are due on April 15, June 15, September 15, and January 15 of the following year.

You can adjust your withholding at any time by submitting a new AR4 form to your employer. If your income changes significantly during the year, updating your withholding can help you avoid a large bill or refund at tax time.

Where to send your return and get help

Mail paper returns to the Arkansas Department of Finance and Administration at the address listed in the form instructions. If you file electronically, the software submits your return directly to the state. Electronic filing is faster and reduces errors — most refunds are issued within two to three weeks for e-filed returns, compared to six to eight weeks for paper returns.

If you have questions about your return or owe tax you cannot pay, contact the Arkansas Department of Finance and Administration directly. They can explain your tax liability, discuss payment plans, and answer questions about deductions and credits. You can reach them by phone, mail, or through their website.

Frequently Asked Questions

Do I owe Arkansas tax if I live in another state but work in Arkansas?

Yes. You owe Arkansas tax on income you earn within the state, even if you live elsewhere. You will file both an Arkansas return and a return in your home state. Most states offer a credit for taxes paid to other states to prevent paying tax twice on the same income.

Is Social Security taxed in Arkansas?

No. Arkansas does not tax Social Security benefits. If Social Security is your only income source, you will not owe Arkansas state income tax, though you may still need to file a federal return depending on your total income.

What happens if I do not file an Arkansas return when I owe tax?

The state can assess penalties and interest on unpaid tax. The longer you wait, the larger the penalty becomes. If you owe but have not filed, contact the Arkansas Department of Finance and Administration to discuss your options — they may be able to work out a payment plan.

Can I deduct federal income tax paid on my Arkansas return?

No. Arkansas does not allow a deduction for federal income tax paid. You can only deduct state and local taxes (SALT) up to $10,000 total on your federal return, not on your state return.

How do I know if my withholding is correct?

Review your pay stub to see how much Arkansas tax is being withheld. If you receive a large refund or owe a large amount when you file, your withholding is off. You can adjust it by submitting a new AR4 form to your employer at any time during the year.