Arkansas Income Tax Calculator
Arkansas just cut its top income tax rate from 4.4% to 3.9% — the latest in a series of reductions under Governor Sanders. But the Natural State has structural quirks most calculators miss: a $2,410 standard deduction that is a fraction of the federal amount, a two-table bracket system that compresses rates for higher earners, and a 50% capital gains exclusion that makes investment income unusually affordable. This calculator covers every layer.
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How Arkansas Income Tax Actually Works
Arkansas has been on one of the steeper income tax rate reduction trajectories of any state in the South over the past five years. The top individual rate sat at 5.9% as recently as 2021. Governor Asa Hutchinson began trimming it, and Governor Sarah Huckabee Sanders accelerated the pace — calling special legislative sessions expressly to push through additional rate cuts. The most recent cut, enacted via Act 1 of the Second Extraordinary Session of 2024, dropped the top individual rate from 4.4% to 3.9%, effective January 1, 2025. Combined with annual inflation indexing of bracket thresholds, the result is that a middle-income Arkansan today pays substantially less state income tax than they would have paid on the same real income five years ago. The trajectory suggests further reductions are politically likely, though no specific future cut is currently codified in law.
Arkansas runs five progressive brackets applying the same thresholds to every filing status, from 0% on the first $5,500 of net taxable income up to 3.9% on income above $26,400. What most newcomers miss is that Arkansas’s standard deduction is just $2,410 — one of the ten lowest in the country and a tiny fraction of the federal standard deduction of $15,750. This means Arkansas taxable income is significantly higher than federal taxable income for most households: the extra $13,340 (or more for joint filers) that the federal return shields from tax gets fully exposed to Arkansas brackets. The practical result is that the true Arkansas tax burden looks higher in effective-rate terms than the nominal 3.9% top rate implies. Arkansas also adds a structural wrinkle known as the two-table system: filers whose total net income exceeds approximately $94,700 must switch to a compressed bracket schedule that jumps to the 3.9% top rate much faster, starting from the first dollar. A bracket adjustment partially offsets this, but taxpayers right at the threshold can face meaningfully different bills depending on which side of the line they land.
Where Arkansas genuinely benefits retirees and investors: Social Security is fully exempt from Arkansas income tax at every income level, with no phase-out. Military retirement pay is completely exempt with no dollar cap. For non-military retirees, the first $6,000 of employer-sponsored retirement income — 401(k) and IRA distributions, pensions, annuities — is shielded from Arkansas tax, though you cannot claim both the military exemption and the $6,000 employer pension exemption in the same year if your military pension is $6,000 or more. Capital gains investors get a significant break: Arkansas allows a 50% exclusion on qualifying long-term capital gains, effectively cutting the state tax on long-term investment profits in half. Short-term gains do not qualify for this exclusion and are taxed as ordinary income. Personal exemptions in Arkansas are structured as a $29 tax credit per person — not a deduction — which gives a small but direct dollar-for-dollar reduction off the computed tax bill.
Frequently Asked Questions
Arkansas uses five progressive brackets for 2025, applied to net taxable income after deductions: 0% on the first $5,500, 2% from $5,501 to $11,200, 3% from $11,201 to $16,700, 3.4% from $16,701 to $26,399, and 3.9% on income above $26,400. These thresholds are indexed annually for inflation. Arkansas’s top rate dropped from 4.4% to 3.9% effective January 1, 2025 under Act 1 of the 2024 Second Extraordinary Legislative Session.
Arkansas’s standard deduction for 2025 is $2,410 — one of the lowest state standard deductions in the country and far below the federal standard deduction of $15,750. The same $2,410 amount applies to single, head of household, and married filing separately filers. Married filing jointly filers receive $4,820. Taxpayers who itemize may use Arkansas itemized deductions instead, but cannot use the Low Income Tax Table if they do.
No. Arkansas fully exempts Social Security benefits from state income tax at every income level and age, with no phase-out.
Yes. The first $6,000 of qualifying employer-sponsored retirement income — including 401(k) distributions, IRA withdrawals, pensions, and annuities — is exempt from Arkansas income tax. Military retirement pay is entirely exempt with no dollar cap. However, you cannot claim both the military retirement exemption and the $6,000 employer pension exemption in the same tax year if your military pension is $6,000 or more.
Yes. Arkansas allows a 50% exclusion on qualifying long-term capital gains, meaning only 50 cents of every dollar of long-term capital gain is subject to Arkansas income tax. Short-term capital gains do not receive this exclusion and are taxed as ordinary income at the full bracket rate.
Arkansas uses two different bracket tables depending on your total net income. Filers with net taxable income at or below approximately $94,700 use the regular five-bracket table (0% to 3.9%). Filers above that threshold switch to a compressed two-bracket table that reaches the 3.9% top rate much faster, starting from the first dollar. A bracket adjustment partially offsets the higher burden for those near the threshold.
Methodology: Calculations use Arkansas’s 2025 five-bracket income tax schedule (0%–3.9%, per Arkansas DFA), the 2025 state standard deduction ($2,410 single/MFS/HOH, $4,820 MFJ), a $29 personal exemption credit per filer and dependent, the $6,000 employer retirement income exemption, full military retirement exemption, 50% long-term capital gains exclusion, the 2025 IRS federal tax brackets and Child Tax Credit rules, and 2025 Social Security (6.2% to the $176,100 wage base) and Medicare (1.45% + 0.9% additional Medicare tax) rates per IRS.gov. Social Security benefits are fully exempt from Arkansas income tax. The high-income two-table system (above ~$94,700) is approximated using a compressed rate schedule. Arkansas permits no local income tax. This tool provides estimates for planning purposes only and is not tax, legal, or financial advice. Last reviewed for accuracy: June 2026.