09 June 2026 Arkansas law lowers top individual income tax rate retroactive to January 1, 2026 At the request of Arkansas Governor Sarah Huckabee, the Arkansas legislature has enacted H.B. 1001, which, retroactive to January 1, 2026, lowers the top individual tax rate from 3.9% to 3.7%. This action reflects the state's policy direction since 2015 to lower income tax rates and is the fifth time since 2023 that the top personal income tax has been lowered. (See Tax Alert 2024-1466.) The Arkansas Department of Finance and Administration has released an updated income tax withholding formula reflecting the revised tax rates and tax brackets. If bonuses, commissions, or overtime wages are paid at the same time as regular wages, the income tax withheld is determined by deducting 3.7% (previously, 3.9%) of the bonus or commission for state income tax. (Arkansas Withholding Tax Employer's Instructions, p.4.) Employers should consider notifying employees of the reduction in the Arkansas state personal income tax and withholding rate so that employees can determine if they need to submit a revised AR4EC, Employee's Withholding Exemption Certificate.
Document ID: 2026-1239 | ||||
