Are you feeling the pinch of Arkansas’s taxman a little tighter this year? You’re not alone. The Natural State has undergone a tax overhaul in 2023, leaving many scratching their heads, from individual income tax brackets to corporate levies and even the dreaded sales tax, Arkansas state shifts the rules of the game bringing new rules and rates that could impact your wallet.
This guide is your roadmap through the complexities of Arkansas’s new tax landscape. Whether you’re a seasoned tax pro or someone who simply wants to understand how much less (or more) you’re forking over, dive in and unravel the mysteries of Arkansas taxes.
1. Standard Deduction Increase
Great news if you’re an Arkansas taxpayer! You’ll be happy to know that the standard deduction has gotten a boost for the 2023 tax year. This means you can subtract more from your taxable income, potentially leaving you with a bigger refund or a smaller tax bill.
If you’re single or married filing separately, your new standard deduction is $2,340. If you’re filing jointly as a married couple, the deduction jumps to $4,680. And don’t worry if you’re a head of household; there’s an increased deduction for you too, but it’s best to double-check the exact amount based on the latest tax guidelines.
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2. Income Tax Rate Reduction
Arkansas gives your wallet a significant boost with recent income tax changes by slashing the top individual income tax rate from its previous 4.9% to a friendlier 4.7%, effective. January 1, 2023. This means more of your hard-earned money stays in your pocket if you’re among the 1.1 million Arkansans earning over $24,300 annually.
To ensure you’re not overpaying throughout the year, the state also adjusts how much tax is withheld from your paycheck, with the new rules kicking in on June 1, 2023. These combined changes provide you with more financial freedom and simplify the tax process.
3. Remote Worker Provisions
Arkansas streamlines tax rules for you if you’re a remote worker. If you’re fortunate enough to work entirely outside the state, you can breathe a sigh of relief – you won’t owe Arkansas state income tax. This clear-cut policy eliminates the uncertainty you face as a remote worker.
And if your job splits time between Arkansas and another state, the taxman is fair: you only pay taxes on the income earned while physically working within Arkansas. These changes offer greater clarity and fairness for you as a remote worker, aligning tax obligations with the actual location of work you perform.
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4. Developmentally Disabled Credit
Good news again if your family cares for loved ones with developmental disabilities! The state simplifies the process for claiming the Developmentally Disabled Credit. You no longer have to go through the hassle of re-certifying your loved one’s disability every five years.
This credit is now permanent, providing ongoing support. To claim your $500 credit for each dependent with developmental disabilities (in addition to the regular $292 dependent credit), simply complete the AR1000TC form. This change offers significant relief and makes it easier for you to access the support your family deserves.
5. Additional Tax Credit for Qualified Individuals
Arkansas has a little extra cash waiting for those who need it most. If you’re struggling to make ends meet and your net income for 2023 falls below $26,100, there’s a potential tax credit of up to $60 waiting for you.
That might not sound like much, but every little bit helps, right? To claim this credit, simply ensure you file your tax return on time. It’s a small step that could make a big difference in your wallet. Remember, deadlines matter, so don’t miss out on this opportunity to lighten your tax burden.
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6. Teacher and Retired Teacher Death Benefits
Act 171 has made some positive changes to handle teacher death benefits. Now, you have more flexibility in deciding who gets your benefits after you’re gone. You now have more flexibility to select multiple beneficiaries instead of just one, ensuring the well-being of your loved ones.
And if you don’t name anyone, your estate receives the benefits. Plus, there’s an added bonus: those benefits might be tax free! That’s a huge relief for your family. Remember, tax laws can be tricky, so it’s always a good idea to chat with a tax expert to get the full picture.
7. Corporate Income Tax Changes
Arkansas is making things easier and more affordable for your business. If your company operates in multiple states, you’ll appreciate the new phased-in method for calculating state taxes.
This means less paperwork and a fairer way to determine how much you owe Arkansas. Plus, the state cut the top corporate income tax rate from 5.9% to 5.3%, putting more money back in your business’s pocket. These changes help your company thrive in Arkansas.
8. Sales and Use Tax
Arkansas gave your wallet a brief break in August! It had a sales tax holiday on August 5th and 6th, meaning you didn’t have to pay sales tax on a bunch of back-to-school stuff. Clothes, shoes, backpacks, school supplies – you name it, it is probably tax-free as long as it is under a certain price. Even online stores and mail-order places had to play by the rules. It was a great way to save some cash while getting ready for the new school year.
9. Other Notable Changes
Arkansas updates the rules for pass-through entities like partnerships and S corporations. You now need to file an annual report detailing your income, expenses, and credits. If you have owners who don’t live in Arkansas, you can choose to pay their taxes for them, but you need to withhold a portion of their earnings at a rate of 5.3%. And if you expect to owe more than $1,000 in taxes, you need to make quarterly estimated payments. These changes might seem like a lot, but they’re designed to make things fairer for everyone.
Recap
Arkansas rolls out several tax changes in 2023 that could impact your finances. You benefit from a higher standard deduction, reducing your taxable income, while a lowered income tax rate means you keep more of your earnings.
If you’re a remote worker, you only owe taxes on income earned while physically in Arkansas. If you’re caring for a loved one with developmental disabilities, claiming the Developmentally Disabled Credit is now easier.
There’s also a potential tax credit if your income falls below $26,100. If you’re a teacher, you now have more control over your death benefits, and your business enjoys reduced corporate tax rates and simplified reporting.
Arkansas also offers a sales tax holiday in August, giving you a break on back-to-school purchases. Lastly, pass-through entities have new reporting requirements and options for managing non-resident owner taxes. These changes aim to make your tax experience smoother and more favorable.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. . For comprehensive tax, legal or financial advice, always contact a qualified professional in your area. S’witty Kiwi assumes no liability for actions taken in reliance upon the information contained herein.
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