Overview of Arkansas Taxes
Arkansas utilizes a progressive income tax rate which is based on taxpayers’ income levels. This means the more you earn, the more you'll owe in taxes. All tax brackets are the same regardless of your filing status.
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Arkansas Paycheck Calculator
Arkansas Paycheck Quick Facts
- Arkansas income tax rate: 0% - 5.90%
- Median household income: $51,183 (U.S. Census Bureau)
- Number of cities that have local income taxes: 0
How Your Arkansas Paycheck Works
Arkansas residents have to pay taxes just like all U.S. residents. For federal income taxes and FICA taxes, employers withhold these from each of your paychecks. That money goes to the IRS, who then puts it toward your annual income taxes, Medicare and Social Security. The information on your W-4 is what your employer uses to figure out how much to withhold for federal taxes. That’s why you need to fill out a W-4 whenever you start a new job. You can also update your W-4 if your filing status changes (for example, if you get married) or if you have additional non-wage income that isn't subject to withholding.
Note that in early 2018, federal income tax rates changed. Within this law, the IRS also made revisions to the Form W-4. More specifically, the new form removes allowances, and replaces it with an area where filers will enter dollar amounts for things like income tax credits, non-wage income, itemized and other deductions and total annual taxable wages. The new W-4 also uses a five-step process that allows filers to enter personal information, claim dependents and indicate any additional income or jobs. Each of these updates primarily affect anyone who is starting a new job or adjusting their withholdings.
One factor that affects how much federal tax is withheld from your paycheck is your marital status. Different tax brackets apply depending on your filing status, so your paycheck will also change with your filing status. Other factors affecting the size of your paycheck include the frequency of your pay periods and what deductions you’ve authorized your employer to make. For example, your employer will deduct money from each of your paychecks if you make contributions to retirement plans, such as a 401(k), or health plans, such as a health savings account (HSA).
Arkansas’ state income tax rates do not change based of your marital status. Instead, the state’s system is based on an individual’s income level. There are six tax brackets with rates ranging from 0% on your first $4,700 up to a rate of 5.90% on income above $38,500.
If you’re a resident of Texarkana, Arkansas, you can claim the border city exemption. This means that any income you earn in Texarkana, if you’re a resident there, is exempt from Arkansas income tax. If you have a job outside this area, you will be subject to state taxes, though.
If you’re thinking about becoming a resident of the Natural State, or if you are considering refinancing a mortgage, take a look at our Arkansas mortgage guide for information on rates and details pertaining to each county.
A financial advisor in Arkansas can help you understand how taxes fit into your overall financial goals. Financial advisors can also help with investing and financial plans, including retirement, homeownership, insurance and more, to make sure you are preparing for the future.
How You Can Affect Your Arkansas Paycheck
Arkansas residents can tweak their paychecks in a few ways. One way to do this is to ask your employer to withhold a certain amount from each paycheck. All you need to do for this is fill in the appropriate line on your W-4 with how much you want withheld. Depending on how much you overpay, you may get some of this extra money back come tax season. As a result, you might choose to do this if you tend to owe a lot when you file your taxes.
Making pre- and post-tax contributions is another way to alter your paycheck. Depending on your budget and priorities, adding more money to different options such as a Health Savings Account (HSA) or a commuter benefits program can help you save on some taxes. Other pre-tax deductions, like a 401(k), decrease your taxable income, which can lower what you owe the IRS in the end.
