Some taxpayers will qualify for a $150 tax credit from Arkansas starting next year. Lawmakers approved the one-time tax credit, as well as other tax relief measures a few months back for corporations and individual taxpayers.
Tax credit from Arkansas: who will get it?
In September, Gov. Sarah Huckabee Sanders signed into law a tax bill that reduces taxes for corporations and individual taxpayers, as well as offers a one-time non-refundable tax credit to eligible residents.
“This week’s latest inflation report shows that Joe Biden’s policies continue to push prices up, making this tax relief more necessary than ever,” Gov. Sanders said when signing the tax relief bill.
A person needs to file a full-year 2023 Arkansas tax return and meet income requirements to qualify for the credit. Taxpayers with income up to $89,600 in 2023 will qualify for the full credit of $150, while the credit amount will phase out for individuals with annual income up to $103,600.
Married couples filing jointly and with income up to $179,200 will be able to claim $300 in tax credit from Arkansas, while the credit will phase out for couples earning up to $207,200. Part-year residents and nonresident filers will not be eligible for the credit.
The tax credit from Arkansas will be effective only for tax year 2023 and will come into effect in January 2024. It is a non-refundable credit, meaning taxpayers can’t get it back as a tax refund; rather, it can only be used to reduce the taxes owed.
Unlike the income tax credit, the $150 tax credit is retroactive to tax year 2023. Eligible residents will be able to claim the credit when they file their 2023 Arkansas state tax return.
Lower income tax rate for individuals, corporations
In addition to the one-time tax credit from Arkansas, the latest tax relief bill further reduces the state’s top income tax rate from 4.7% to 4.4%. The reduced tax rebate applies to those with income of $24,300 to $87,000.
It must be noted that the new tax rate won’t take effect until 2024. So, taxpayers falling into the top bracket will be subject to the earlier tax rate of 4.7% for 2023. Even at 4.7%, the tax rate in Arkansas is much lower than in most other states.
Also, the governor reduced the state’s top corporate income tax rate from 5.1% to 4.8%. The new corporate income tax rate will also be effective Jan. 1, 2024, and it will apply to corporations with income more than $11,000 for tax years starting on or after Jan. 1, 2024.
Reducing the state’s top individual income tax rate is estimated to reduce the state general revenues by $75 million in fiscal 2024 and $150 million in fiscal 2025. Similarly, reducing the state’s top corporate income tax rate is estimated to lower the state’s general revenues by $17.2 million in fiscal 2024 and $34.5 million in fiscal 2025.
