Arkansas Payroll Taxes and Withholding Guide (2026)

What Makes Arkansas Payroll Different

Federal payroll tax is the same in every state. What changes from one state to the next is the second layer: state income tax withholding, employer unemployment taxes, and any employee social-insurance contributions. Arkansas sits at the simpler end of that range. Its income tax is graduated, but it deducts nothing else from employees: no state disability, no paid family leave, and no employee unemployment.

Many high-tax states layer extra employee deductions on top of income tax. New Jersey takes worker contributions for unemployment, disability, and family leave; California deducts state disability. Arkansas does none of that. An Arkansas pay stub therefore has fewer lines than a New Jersey or California stub: federal taxes and the state income tax, and that is it. The federal baseline behind all of this is explained in the how payroll taxes work guide.

Employee Withholding Overview in Arkansas

An Arkansas employee sees federal taxes and a single graduated state income tax line. There is no local wage tax and no state social-insurance deduction. The deductions fall into two groups: federal taxes and Arkansas income tax.

The federal lines work identically to any other state. For Social Security, the 2026 wage base is $184,500, after which Social Security stops for the year. Medicare has no cap. The only state line is the Arkansas income tax. There is no employee unemployment, disability, or family leave line, because Arkansas does not levy those on workers.

How Is Arkansas Income Tax Withheld?

Arkansas has a graduated income tax withheld by the DFA formula method, which applies to every employee regardless of filing status. Employers annualize wages, subtract a flat $2,470 standard deduction to get net taxable income, round that figure to the nearest $50 midrange, then apply the bracket schedule below and subtract a $29 personal tax credit per exemption. The 2026 figures are shown; for 2025 the standard deduction was $2,410 and the top rate 3.9%.

Arkansas does not use filing status to widen the schedule; the same brackets apply to single and married filers, and only the AR4EC exemption count changes the result, and then only by $29 each. A high-income bracket-adjustment table between about $94,700 and $97,601 of net taxable income (2026) phases out the lower-bracket benefit so high earners effectively pay a flat top rate. The federal Form W-4 sets federal withholding, covered in the W-4 withholding explained guide, while Form AR4EC sets the Arkansas exemptions. Because withholding is an estimate, the final Arkansas tax is settled on Form AR1000F.

The Arkansas Withholding Formula and Form AR4EC

Form AR4EC, the Employee's Withholding Exemption Certificate, is Arkansas's version of the federal W-4, but it works differently from an allowance-based state. Its exemptions do not reduce your wages; they buy a small tax credit at the end of the calculation.

The Formula

The DFA formula method annualizes your wages, subtracts the flat $2,470 standard deduction (2026; $2,410 for 2025) to get net taxable income, and rounds that figure to the nearest $50 midrange (truncate to the nearest $100 and add $50). It then applies the graduated bracket schedule, rounds to the nearest dollar, and subtracts a $29 personal tax credit for each AR4EC exemption. The result is divided by the number of pay periods.

Why Exemptions Barely Move the Check

Because each exemption is only a $29 annual credit, claiming an extra one raises take-home pay by about $1.12 on a biweekly check, not the large swing an allowance produces in a state like Minnesota or Iowa. The lever that actually matters is the $2,470 standard deduction, and it applies to everyone regardless of exemptions. An employee with no AR4EC on file is withheld using zero exemptions, but that only costs about $29 per year per unclaimed exemption, a much smaller default penalty than the allowance-based states impose. The Arkansas paycheck calculator lets you set exemptions directly so you can see the modest effect.

Arkansas Deducts No Employee Disability, Family Leave, or Unemployment

This is where Arkansas is simpler than the high-tax states. Some states deduct social-insurance contributions from employee wages. Arkansas deducts none.

• No state disability insurance: Arkansas has no mandatory short-term disability payroll deduction, unlike California or New Jersey.
• No paid family leave payroll tax: Arkansas has not enacted a state-run paid family and medical leave program funded by employee payroll deductions.
• No employee unemployment tax: Unemployment insurance is funded entirely by employers through the Division of Workforce Services. Workers pay nothing toward it, and no unemployment line appears on an employee stub.

The practical result is that the only state deduction an Arkansas employee sees is the income tax. That is why an Arkansas stub is shorter than a New Jersey stub, which carries three separate employee contribution lines on top of the income tax.

Employer Payroll Obligations in Arkansas

Arkansas employers carry the federal employer taxes plus the state unemployment contribution. The federal side, covered in the employer payroll tax obligations guide, includes the matching 6.2% Social Security and 1.45% Medicare plus Federal Unemployment Tax (FUTA). On top of that, Arkansas adds a state unemployment tax paid entirely by the employer.

Arkansas state unemployment tax is assessed only on the first $7,000 of each employee's wages for both 2025 and 2026, and the rate depends on the employer's experience rating with the Division of Workforce Services. New employers pay a 3.1% rate for about three years until they have enough history for an experience-based rate. None of this is deducted from employee pay. The combined cost-to-hire can be modeled with the employer payroll tax calculator.

Arkansas Has No Local Wage Income Tax

Arkansas has no municipal or county wage income tax deducted from employees. A worker in Little Rock, Fayetteville, Fort Smith, or anywhere else in Arkansas pays the state income tax, but no city or county income tax line.

This is a meaningful difference for cross-border commuters. A worker arriving from a state with local wage taxes, such as Missouri (Kansas City and St. Louis earnings taxes) or Kentucky (occupational taxes), is used to a city or county income tax stacked on top of the state tax; there is no Arkansas equivalent. So a worker moving to Arkansas will not see a local wage line, and its absence is correct, not a payroll error. The one exception runs the other way: in Texarkana, a border-city exemption removes even the state tax, as the next section explains.

The Texarkana Border-City Exemption

Arkansas has one payroll feature no other state shares: the Texarkana border-city income tax exemption. Under Act 48 of 1977, residents of Texarkana, Arkansas are exempt from Arkansas income tax on all of their income, and residents of Texarkana, Texas are exempt from Arkansas income tax on income earned in Texarkana, Arkansas. The exemption exists because the two Texarkanas share a single downtown across the state line, and Texas has no income tax, so Arkansas relieved its side to keep the labor market even.

Employees claim it by filing Form AR4EC(TX) with their employer, which stops Arkansas withholding on qualifying wages. Two limits matter. First, the exemption applies only inside the city limits of either Texarkana; a worker on a rural route or in a surrounding town such as Nash or Wake Village does not qualify, which surprises new hires who assume the whole metro area is covered. Second, exempt residents must still file an Arkansas income tax return (Form AR1000F) to claim the exemption; it is not automatic. Arkansas has no general reciprocity agreements with any state, so outside Texarkana a nonresident earning Arkansas wages is withheld on and files an Arkansas nonresident return, claiming a home-state credit to avoid double taxation.

Arkansas Supplemental Wage Withholding

Supplemental wages are payments outside regular salary: bonuses, commissions, overtime, sales awards, and back pay. Arkansas withholds income tax on supplemental wages, and it publishes a flat supplemental rate equal to the top marginal rate (3.9% for 2025, falling to 3.7% for 2026) that an employer may apply to bonuses paid separately from regular wages.

• Arkansas income tax on supplemental wages: withheld at the flat top-rate percentage, or by adding the supplemental pay to regular wages and applying the formula method.
• There are no Arkansas disability, family leave, or unemployment employee contributions to apply to supplemental pay, because Arkansas does not levy them.
• Federal income tax withholding on supplemental wages is a separate calculation set by the IRS, and Social Security and Medicare still apply under their own rules.

For the federal supplemental math on a bonus, use the Bonus Tax Calculator.

Arkansas Filing and Payment Frequency

Arkansas employers report and remit withheld income tax through the DFA online portal, ATAP (Arkansas Taxpayer Access Point). Withholding is deposited and reported on a schedule that depends on the amount withheld, generally monthly, with an annual reconciliation (Form AR3MAR) and W-2 filing after year end. Larger employers may be required to file and pay electronically. The federal deposit schedule is covered separately in the payroll tax deadlines guide.

State unemployment contributions are reported and paid separately to the Division of Workforce Services on its own quarterly schedule through the DWS Tax21 portal. New employees must be reported to the Arkansas new hire reporting center shortly after the hire date.

How Take-Home Pay Works in Arkansas

The calculation sequence runs from gross pay down to net pay. Arkansas income tax starts from net taxable wages after the standard deduction, and there are no state social-insurance lines to add.

1. Start with gross wages for the pay period.
2. Apply federal income tax withholding using the Form W-4 and IRS Publication 15-T.
3. Annualize wages, subtract the $2,470 standard deduction, round to the nearest $50 midrange, apply the 0 to 3.7% bracket schedule, subtract the $29 credit per AR4EC exemption, and divide by pay periods for the Arkansas income tax. A qualifying Texarkana resident withholds $0.
4. Subtract Social Security (6.2%) and Medicare (1.45%) on FICA wages.
5. The remainder is net pay. There are no state disability, family leave, or unemployment deductions to subtract.

To see exact figures for a specific salary, AR4EC exemption count, and pay frequency, use the Arkansas paycheck calculator or the general take-home pay calculator for a full pre-tax benefits stack.

What Arkansas Employees Should Check on a Pay Stub

• Arkansas income tax line: Confirm AR income tax is withheld (unless you qualify for the Texarkana exemption). Remember that AR4EC exemptions change it only about $29 per year each.
• No employee contribution lines: There should be no state disability, family leave, or unemployment deduction. If you see one, question it, because Arkansas does not levy those on employees.
• No local tax line: Arkansas has no city or county income tax, so there should be no local wage line.
• FICA: Confirm Social Security at 6.2% (until $184,500 of wages for 2026) and Medicare at 1.45% with no cap.
• Texarkana: If you live inside the Texarkana city limits and filed Form AR4EC(TX), confirm no Arkansas income tax is being withheld.

What Arkansas Employers Should Verify Before Running Payroll

• State registration: Confirm active accounts for Arkansas income tax withholding with the DFA (ATAP) and for unemployment tax with the Division of Workforce Services, and check the annual DWS tax-rate notice.
• AR4EC on file: Collect a current Form AR4EC from each employee; without one, withhold using zero exemptions.
• Current formula: Confirm the payroll system uses the current year's figures, the 2026 $2,470 standard deduction, the 0 to 3.7% schedule, the $50 midrange lookup, and the $29 exemption credit (or the 2025 $2,410 standard deduction and 3.9% top rate for 2025 pay).
• Texarkana exemption: Collect Form AR4EC(TX) from qualifying Texarkana residents and stop Arkansas withholding on their wages.
• New hire reporting: Report each new worker to the Arkansas new hire reporting center.

Arkansas Payroll Quick Facts (2026)

Frequently Asked Questions