Arkansas Cuts Its Top Income Tax Rate to 3.7% for 2026
The newly signed law applies the lower individual rate to the full 2026 tax year.
Arkansas Governor Sarah Huckabee Sanders signed House Bill 1001 and Senate Bill 1 on May 6, reducing the state's top individual income tax rate from 3.9% to 3.7% for 2026. The lower rate applies to the full tax year, including income earned before the signing.
The Arkansas Department of Finance and Administration (DFA) estimates that approximately 1.1 million individual taxpayers with net taxable income of $26,400 or more will receive a tax reduction. The legislation also revises the bracket adjustment for taxpayers moving from the Standard Income Table to the Upper Income Table.
What Changes in the Income Tax Rates?
Arkansas keeps its graduated income tax system. The Standard Income Table has five brackets and applies to net taxable income of $94,700 or less. The top rate falls from 3.9% to 3.7%, while the four lower rates and the bracket thresholds remain unchanged.
| Tax Bracket | 2025 | 2026 |
|---|---|---|
| $0 to $5,599 | 0% | 0% |
| $5,600 to $11,199 | 2% | 2% |
| $11,200 to $15,999 | 3% | 3% |
| $16,000 to $26,399 | 3.4% | 3.4% |
| $26,400 to $94,700 | 3.9% | 3.7% |
Taxpayers with net taxable income above $94,700 use the Upper Income Table, which has two brackets. It taxes the first $4,700 at 2% and the remaining taxable income at 3.7%, down from 3.9%. The table retains two brackets, but most taxable income for taxpayers using it falls in the 3.7% bracket.
How Much Does the Rate Cut Save?
The top rate falls by 0.2 percentage point. For each $10,000 of taxable income subject to that rate, the reduction saves $20. Both examples use single filers with the same net taxable income before and after the rate cut.
Standard Income Table: A single filer with $80,000 of net taxable income has about $53,600 in the top bracket. Reducing the rate on that portion from 3.9% to 3.7% saves approximately $107 for the year. The income in the four lower brackets continues to be taxed at the same rates.
Upper Income Table: A single filer with $160,000 of net taxable income pays 2% on the first $4,700. The remaining $155,300 is taxed at 3.7% instead of 3.9%, saving approximately $311 for the year.
These estimates compare the rate change before tax credits. They use net taxable income, not gross salary or total household income.
Which Tax Year Uses the New Rate?
The individual reduction applies to tax years beginning on or after January 1, 2026. For calendar-year taxpayers, it belongs on the 2026 return generally filed in 2027. It does not change the rate used on a 2025 return filed this year.
Taxpayers reviewing 2026 estimated payments should account for the new law when projecting their annual state tax. The original 2026 AR1000ES worksheet, revised October 17, 2025, still uses the previous 3.9% rate. Check that any worksheet or software calculation reflects the new schedule before relying on it.
Our state income tax rates hub lets you compare Arkansas with other states. Visit our Arkansas income tax forms page for available returns and instructions, and select the edition for the tax year you are preparing.
References:
- Bills Signed: HB1001, SB1. May 6, 2026 signing announcement. Office of Arkansas Governor Sarah Huckabee Sanders. Retrieved September 24, 2026.
- Act 2 of the 2026 First Extraordinary Session (Senate Bill 1). Section 1 establishes the individual income tax tables and bracket adjustment. Approved May 6, 2026. Arkansas General Assembly. Retrieved September 24, 2026.
- Fiscal Impact Statement for House Bill 1001. May 1, 2026. Taxpayer estimate, rate changes, and transition adjustment explanation. Arkansas Department of Finance and Administration. Retrieved September 24, 2026.
- 2025 Indexed Tax Brackets. Final 2025 rates and bracket thresholds used in the comparison. Arkansas Department of Finance and Administration. Retrieved September 24, 2026.
- 2026 AR1000ES: Estimated Tax for Individuals. Worksheet revised October 17, 2025. Cited for the pre-law schedule, not the enacted 3.7% rate. Arkansas Department of Finance and Administration. Retrieved September 24, 2026.