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June 26, 2024

Arkansas law lowers personal income tax rate retroactive to January 1, 2024

On June 19, 2024, Arkansas Governor Sarah Huckabee Sanders signed into law S.B. 1 which, retroactive to January 1, 2024, lowers the state's personal income tax rate from 4.4% to 3.9%. The Arkansas Department of Finance and Administration (Department) projects that individual taxpayers will save $384 million in 2025 and $256 million in 2026.

This is the third time in the last 15 months that legislation has been enacted to lower the state's personal income tax rate. SB 549 lowered the personal income tax rate from 4.9% to 4.7% retroactive to January 1, 2023, and SB 8 had lowered the personal tax rate from 4.7% to 4.4% effective January 1, 2024.

Supplemental wages

Effective retroactive to January 1, 2024, the supplemental rate of withholding on bonuses and other irregular wage payments is reduced from 4.4% to 3.9%.

Ernst & Young LLP insights

Employers will need to immediately implement the lower personal income tax rate once the updated withholding formula is released by the Department.

The updated Arkansas withholding formula and tables, once available, will be published here.

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Contact Information

For additional information concerning this Alert, please contact:

Workforce Tax Services - Employment Tax Advisory Services

Published by NTD’s Tax Technical Knowledge Services group; Andrea Ben-Yosef, legal editor