What Is the Arkansas Income Tax Rate?
Navigate Arkansas income tax with clarity. Understand rates, calculate taxable income, and confidently file your state tax return.
Arkansas imposes a state income tax on individuals, separate from federal income tax. Understanding these state-specific tax rates and filing procedures aids financial planning for anyone earning income within the state. Arkansas operates a progressive income tax system, meaning higher income levels are subject to higher tax rates.
Understanding Arkansas Income Tax Rates
Arkansas utilizes a progressive income tax system, where the tax rate applied to income increases as the income level rises. For the 2024 tax year, individual income tax rates range from 0% to a top rate of 3.9%. This top rate saw a reduction from previous years, effective January 1, 2024.
The state’s tax structure includes multiple income brackets, each with a corresponding marginal tax rate. For the 2024 tax year, taxable income between $0 and $5,499 is taxed at 0%. Income from $5,500 to $10,899 is taxed at 2%, and subsequent brackets apply higher rates. The highest rate of 3.9% applies to taxable income of $25,700 and higher.
A marginal tax rate is the rate applied to your last dollar of taxable income. An effective tax rate is the total tax paid divided by your total taxable income, providing an overall average tax rate.
Because of the progressive system, your effective tax rate will generally be lower than your highest marginal tax rate. For example, a taxpayer with $25,000 in taxable income for 2024 would pay 0% on the first $5,499, 2% on the income between $5,500 and $10,899, and so on, with the 3.4% rate applying to the portion of income within the $15,600 to $25,699 bracket. This demonstrates that not all of a taxpayer’s income is taxed at the highest marginal rate; instead, different portions are taxed at their respective bracket rates.
Determining Your Arkansas Taxable Income
Arkansas taxable income starts with gross income. Gross income includes earnings such as salaries, wages, compensation for personal service, profits from businesses, gains from property dealings, interest, rent, royalties, dividends, annuities, and alimony. It broadly encompasses all income flowing to the taxpayer.
Adjustments reduce gross income to arrive at adjusted gross income (AGI). Arkansas generally adopts many federal income tax provisions for these adjustments. For example, the first $6,000 of employer-sponsored retirement plans and qualified IRA income is exempt from state tax. Social Security benefits and military retirement pay are also fully exempt from Arkansas state income tax.
Taxpayers choose between claiming a standard deduction or itemizing deductions to further reduce taxable income. For the 2024 tax year, standard deduction amounts are $2,410 for single filers and heads of household, and $4,820 for those married filing jointly. If eligible itemized expenses exceed the standard deduction amount, itemizing may result in a lower taxable income. Common itemized deductions in Arkansas are similar to federal guidelines and can include medical expenses above a certain percentage of income, charitable contributions, and mortgage interest.
Arkansas offers personal tax credits instead of a personal exemption. A $29 credit is available for each filer and each dependent. Additional credits may apply for specific circumstances, such as being over 65 or legally blind.
Filing Your Arkansas Income Tax Return
Filing requirements for an Arkansas state income tax return depend on gross income, filing status, and residency. Full-year residents must file if their gross income exceeds specific thresholds, which vary by filing status and number of dependents. Part-year residents and nonresidents with any gross income from Arkansas sources must file a return.
Taxpayers can submit their Arkansas income tax return electronically through approved software or by paper filing using forms such as Form AR1000 for full-year residents or Form AR1000NR for nonresidents and part-year residents. Payment options for any tax due include online payments through the Arkansas Taxpayer Access Point (ATAP), which allows payments via ACH debit, credit card, or debit card. Taxpayers can also mail a check or money order with a payment voucher. Estimated tax payments may be required if a taxpayer expects to owe more than $1,000 in tax from income not subject to withholding, such as self-employment income or certain retirement income.
The standard deadline for filing Arkansas individual income tax returns is April 15, aligning with the federal tax deadline. If April 15 falls on a weekend or holiday, the deadline shifts to the next business day. An extension to file may be granted, typically until November 15, if a federal extension is filed. An extension to file does not extend the time to pay any tax due, and interest and penalties may accrue on unpaid taxes from the original due date.