Income Taxes in Arkansas
Arkansas's income tax is genuinely distinctive for a real, repeated cut this record credits directly: the top marginal rate fell to 3.7% for tax year 2026, the fourth consecutive annual cut from a historical high near 7% before 2015 -- paired with a full Social Security exemption and a modest but real exclusion on other retirement income.
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Learn moreA 3.7% top rate for 2026, the fourth cut in four years
A three-day special legislative session (May 4-6, 2026) produced HB1001 and SB1, which Governor Sarah Huckabee Sanders signed into law on May 6, 2026, cutting Arkansas's top individual income tax rate from 3.9% to 3.7% -- retroactive to January 1, 2026 -- and applying to Arkansas taxable income above $26,400 (single-table filers) or above roughly $4,700 in the alternate high-income two-tier table used above $94,700 net taxable income. This record independently verified this figure against the Arkansas Department of Finance and Administration's own 2026 withholding tables.
A real, dated phase-down history, not a static rate
This is the fourth consecutive year of a real, disclosed cut: a historical top rate near 7% (pre-2015) fell to 4.9% (completed under Governor Asa Hutchinson), then to 4.7% (2023 regular session), 4.4% (2023 special session), 3.9% (June 2024 special session), and now 3.7% (May 2026) -- each cut funded from state revenue surplus. Roughly 1.1 million Arkansas taxpayers benefit from the 2026 cut, per the state's own fiscal impact estimate.
Further cuts are a stated goal, not yet a legislated certainty
Governor Sanders has stated a real, disclosed long-term political goal of eventually phasing out Arkansas's individual income tax entirely. This record discloses honestly that no further cut is currently written into statute as a scheduled or revenue-trigger-contingent reduction as of this record's research date -- a genuine stated intention, not yet a legislated certainty, and the two should not be conflated.
A full Social Security exemption, and a modest pension exclusion
Arkansas fully and unconditionally exempts Social Security retirement benefits from state income tax, regardless of total income or filing status. Separately, taxpayers 59.5 or older may exclude the first $6,000 of pension, 401(k), IRA, or qualifying annuity distributions from public or private retirement plans -- a real but genuinely modest exclusion, smaller than the full exemptions several other states offer, with any remaining amount taxed under the regular graduated schedule.
Military retirement pay is fully exempt
Arkansas military retirement pay is real, fully exempt from state income tax -- a distinct and more generous benefit than the general $6,000 pension exclusion, credited separately for veterans specifically.
Key takeaways
- Arkansas's top individual income tax rate is 3.7% for 2026, applying above $26,400 in taxable income -- the fourth consecutive annual cut.
- The phase-down runs from a historical ~7% rate (pre-2015) through 4.9%, 4.7%, 4.4%, 3.9%, and now 3.7% (May 2026).
- Further cuts toward eventually eliminating the tax are a stated goal, not currently scheduled in statute.
- Social Security is fully exempt; other retirement income (pension/401(k)/IRA) gets a modest $6,000 exclusion for filers 59.5+, while military retirement pay is fully exempt.
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