Taxes in Fayetteville
Arkansas's real, current top individual income tax rate dropped to 3.7% effective January 1, 2026 (signed into law May 6, 2026) -- the fourth cut since 2023 -- alongside a full Social Security exemption and a separate $6,000 retirement-income exclusion, a genuinely low Fayetteville property tax rate, and a combined sales tax that runs a genuinely high 9.75%-12.25%.
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Learn moreArkansas's Top Income Tax Rate Just Dropped Again, to 3.7%
Governor Sarah Huckabee Sanders signed a real law on May 6, 2026, during a special legislative session, cutting Arkansas's top individual income tax rate from 3.9% to 3.7%, retroactive to January 1, 2026 -- the fourth individual income tax cut since Sanders took office in 2023. Arkansas remains a real, graduated system (not flat): 0% on the first $5,599 of net taxable income, rising through brackets to the 3.7% top rate applying above approximately $26,400.
A Full Social Security Exemption Plus a $6,000 Retirement-Income Exclusion
Arkansas fully, unconditionally exempts all Social Security retirement benefits from state income tax for all residents, regardless of income or filing status. Separately, a real $6,000 per-person exclusion applies to other qualified retirement income (pensions, 401(k)s, with IRA distributions qualifying for taxpayers 59.5 or older) -- two real, genuinely retiree-relevant benefits this record discloses specifically.
Amendment 79's Real Homestead Credit and Assessed-Value Caps
As detailed in full on the property-taxes topic page, Arkansas's Amendment 79 homestead credit rose to a maximum of $600 per homestead beginning with 2026 tax bills, and caps annual homestead assessed-value growth at 5% following reappraisal -- a real, specific mechanism, not a generic "low property tax" claim.
The Genuine Trade-Off: A High Combined Sales Tax
Arkansas's real, current statewide base sales tax rate is 6.5%, and Fayetteville's own combined rate -- 6.5% state plus 1.25% Washington County plus 2.0% city -- runs 9.75% across most of the city, ranging up to 12.25% in some specific local taxing districts. This is a real, disclosed, comparatively high combined rate, consistent with Arkansas's broader statewide pattern of low property tax paired with a high combined sales tax.
Weigh the Full Combined Tax Picture, Not Any Single Line
Fayetteville's genuinely low income tax (3.7% top rate) and low property tax (approximately 0.59%-0.70% effective) run alongside a genuinely high combined sales tax (9.75%-12.25%) -- movers, especially those doing significant everyday spending locally, should weigh the full combined picture rather than any single tax line in isolation.
Key takeaways
- Arkansas's top individual income tax rate dropped from 3.9% to 3.7%, retroactive to January 1, 2026, the fourth cut since 2023.
- Social Security is fully exempt from Arkansas state income tax for all residents; a separate $6,000 per-person exclusion applies to other retirement income.
- Amendment 79's homestead credit rose to a maximum of $600 per homestead beginning with 2026 tax bills, alongside a 5%/year assessed-value growth cap.
- Fayetteville's combined sales tax runs 9.75%-12.25% -- a genuine, disclosed trade-off against the state's low income and property tax rates.
- Weigh Fayetteville's full combined tax picture (low income/property tax, high sales tax) rather than any single tax line in isolation.
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