Arkansas taxes capital gains at 4.4%. Combined with federal taxes, your effective rate on a home sale could reach 23.2%.
AR State Rate
4.4%
Top marginal rate
Federal Rate
15%
Most common long-term bracket
Combined Effective
23.2%
On $150K taxable gain (example)
After the $250K/$500K exclusion, here's what a typical seller might owe.
If Arkansas is where your primary residence is located and you've lived there at least 2 of the last 5 years, you can exclude up to $250K (single) or $500K (married filing jointly) of your capital gain from both federal and state taxes.
Investment and rental properties in Arkansas don't qualify for the exclusion. You'll owe 4.4% state tax plus federal tax on the full gain, plus 25% depreciation recapture on any depreciation claimed.
In Arkansas, homes sold in February sell for 6% more than those sold in October (-7%). Timing your sale right can offset a significant portion of your tax bill.
Capital gains tax rates on home sales in Arkansas and nearby states.
| State | Rate | Tax on $150K Gain | Notes |
|---|---|---|---|
| 0% | $0 | No state income tax | |
Texas0% | 0% | $0 | No state income tax |
| 4.25% | $6,375 | Top marginal rate (2026) | |
ArkansasYou | 4.4% | $6,600 | Top marginal rate |
| 4.7% | $7,050 | Flat tax (2026) | |
| 4.75% | $7,125 | Top marginal rate | |
| 4.8% | $7,200 | Top marginal rate |
Selling in Tennessee instead of Arkansas would save $6,600 in state tax on a $150K gain.
Arkansas taxes capital gains as ordinary income with a top marginal rate of 4.4%. The state uses a graduated income tax system, so your effective rate depends on your total taxable income for the year of the sale. Most home sellers with significant gains will hit the top bracket.
One notable feature of Arkansas tax law is that it does not offer a separate capital gains rate or deduction for long-term capital gains. All gains are treated the same regardless of holding period at the state level. However, the state's relatively low cost of living and home prices mean many sellers have modest gains that are fully covered by the federal exclusion.
For investment property sales, Arkansas imposes the full 4.4% on all gains without the benefit of the federal exclusion. Combined with federal taxes of 15-20% plus NIIT and depreciation recapture, investment property sellers in Arkansas can face a combined effective rate exceeding 30% on their total gain.
Arkansas borders six states with varying tax policies. Missouri (4.8%), Tennessee (0%), Mississippi (4.7%), Louisiana (4.25%), Texas (0%), and Oklahoma (4.75%) all offer different tax environments. Sellers considering relocation before a sale should compare the total tax impact across these neighboring states.
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