Arkansas Income Tax Rates & Brackets (Tax Year 2025 — Filed in 2026)

Remote Workers and Multi-State Taxation

Arkansas Resident Working Remotely for an Out-of-State Employer

As an Arkansas resident, you owe Arkansas income tax on all income from all sources, regardless of where your employer is located. The location of your employer does not determine your Arkansas tax obligation.

What this means:

• An Arkansas resident working remotely from home for a company based in Texas, California, or any other state owes Arkansas income tax on that income.
• If no Arkansas withholding is being taken out of your paycheck, you may owe estimated tax payments to Arkansas throughout the year (Form AR1000ES).

Example: An Arkansas resident living in Little Rock who works remotely for a New York employer owes full Arkansas income tax on all wages earned, even though no work is performed in New York.

Source: https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR1000F_and_AR1000NR_Instructions.pdf

Non-Resident Working Remotely — Arkansas Physical Presence Rule (Act 1019 of 2021)

Arkansas uses a physical presence rule for sourcing income of non-residents:

• A non-resident who performs all work duties from outside Arkansas owes no Arkansas income tax on that income.
• If work is performed both inside and outside Arkansas, only the portion reasonably allocable to time physically spent inside Arkansas is taxable.
• The allocation is based on the actual time physically present in Arkansas performing work duties.

Non-resident remote worker verification: Non-residents claiming no Arkansas-source income (because all work is performed outside the state) must check the “Remote Worker” box on Form AR1000NR and attach a statement on company letterhead from the employer confirming that no work was completed in Arkansas. If there was no Arkansas withholding on wages, a return is not required.

Source: https://www.dfa.arkansas.gov/office/taxes/income-tax-administration/individual-income-tax/whats-new/

Arkansas Does NOT Apply a “Convenience of the Employer” Rule

Arkansas does not apply a “convenience of the employer” rule. Non-residents are taxed only on income earned from work physically performed in Arkansas. If a non-resident performs all duties from their home state, none of that income is subject to Arkansas tax — regardless of where the employer is headquartered.

This stands in contrast to states like New York, which may tax non-residents working for New York employers even if all work is performed outside New York.

Source: https://www.dfa.arkansas.gov/office/taxes/income-tax-administration/individual-income-tax/whats-new/ (Act 1019 of 2021)

Reciprocal Agreements

Arkansas does not have reciprocal income tax agreements with any other state. There are no formal arrangements that would allow residents of a neighboring state working in Arkansas to be taxed only in their home state, or vice versa.

Practical implications:

• An Arkansas resident working in Missouri must file non-resident returns in Missouri and pay Missouri income tax on Missouri-source income.
• That same Arkansas resident then claims a credit on their Arkansas return for taxes paid to Missouri (Credit for Taxes Paid to Another State — Form AR1000TC).
• A Missouri resident working in Arkansas must file an Arkansas non-resident return (Form AR1000NR) and pay Arkansas income tax on Arkansas-source wages.

Texarkana special exemption: A limited tax exemption exists for the unique Texarkana border area. Residents within the city limits of Texarkana, Arkansas are fully exempt from Arkansas individual income taxes. Residents within the city limits of Texarkana, Texas are exempt from Arkansas income taxes on income earned from businesses located in Texarkana, Arkansas only (not all Arkansas income). These taxpayers must still file an Arkansas return and submit Form AR-TX.

Source: https://www.dfa.arkansas.gov/wp-content/uploads/texarkana-exemption-letter-1.pdf

Multi-State Tax Filing for Arkansas Residents

When an Arkansas resident earns income in multiple states:

1. File Form AR1000F (full-year resident return) reporting all income from all sources.
2. File non-resident returns in each other state where income was earned.
3. Claim the Credit for Taxes Paid to Another State on Form AR1000TC (attached to the Arkansas return), limited to the lesser of actual taxes paid to the other state or the Arkansas tax on the same income.
4. Attach a signed copy of each other state’s return to the Arkansas return.

Source: https://www.dfa.arkansas.gov/wp-content/uploads/2024_AR1000TC_Instructions.pdf

⚠️ Interstate Tax Risk Indicator

Arkansas residents commonly encounter dual-taxation complications when working with or in the following states:

• New York — Applies the “convenience of the employer” rule, potentially taxing income even when work is performed outside New York for a NY employer.
• California — Aggressive residency audits; may assert California tax liability on former residents.
• Pennsylvania — Over 2,600 local income tax jurisdictions and complex sourcing rules.
• Connecticut — Complex credit system for taxes paid to other states.
• Massachusetts — Has historically applied telecommuter rules to non-residents.

Arkansas residents working with these states should consult a tax professional familiar with both Arkansas and the target state’s rules.

Source: Arkansas DFA individual income tax guidance and IRS Publication 505.