Most homeowners in Arkansas are eligible for a homestead credit under Amendment 79 to the Arkansas Constitution. To qualify, your home generally needs to be your primary residence.
How the Arkansas Homestead Tax Credit Works
Arkansas residents receive four key benefits under Amendment 79.
Homestead Tax Credit
All homeowners can receive up to a $375 property tax credit on their homestead.
A homestead is simply your principal place of residence. If you have one home, that’s almost always going to be your homestead. If you have a second home, your homestead is usually where you live and work most of the time.
The homestead tax credit directly reduces your property taxes. It does not change your home’s assessment value like in other states. It’s also not an income tax credit like the Missouri property tax credit.
For example, if you receive a $500 property tax bill, the homestead tax credit will reduce it to $125.
If your property tax bill is $375 or less, you’ll owe nothing. You can’t get a refund for any unused portion of the property tax credit. You also can’t apply the property tax credit to a non-homestead property that you may own.
Note: The credit only applies to ad valorem real estate taxes. If you have other taxes on your property tax bill, such as special improvement taxes or personal property taxes, you can’t apply the credit towards those taxes even if your real estate taxes are less than $375.
Limit on Assessed Value Increases for Homestead Properties
Another benefit of Arkansas’s homestead laws is limiting increases in your property’s assessed value.
Your assessed value generally can’t go up by more than 5% per year. For example, if your home’s market value increases by 10% from $100,000 to $110,000, your property tax assessment will be based on a $105,000 assessed value.
Increases in value due to substantial improvements or new construction are generally not protected under this provision.
Note: This provision does not apply to property tax rate increases. Your property taxes can go up by more than 5% if property tax rates increase. The limit only applies to the assessed value of the home, and you’ll always pay the current property tax rate on that amount.
Assessed Value Freeze for the Elderly and Disabled
While there’s no age to stop paying property taxes in Arkansas, there is an age when your property taxes stop going up.
Once you’re age 65 or older, your property’s assessed value gets frozen. Instead of being limited to 5% increases each year, your assessed value won’t go up at all.
People who are 100% disabled can receive the same benefit.
To qualify, the real property must be your homestead. You’ll also need to contact your county tax office to apply and provide proof of age or disability.
Again, this property tax relief only applies to changes in your home’s value. If property tax rates go up, you will have to pay the new tax rate.
Limit on Assessed Value Increases for Non-Homestead Properties
Non-homestead properties can also qualify for Arkansas property tax relief.
For non-homestead properties, your assessed value can’t go up by more than 10% each year. Like with the 5% limit for homestead properties, the limit only applies to assessed value, and there is no limit on tax rate increases.
The limit does not apply to substantial improvements or new construction.
Frequently Asked Questions
What happens if you move?
The homestead tax credit in Arkansas is determined for each piece of real property as of January 1st of each year. When you sell a home you had homesteaded, your homestead credit doesn’t automatically transfer to your new home.
For the first year, your property tax bill will usually depend on whether the seller had the homestead credit as of January 1st. Future years will depend on whether you qualify and apply for the homestead tax credit on your new home.
Similarly, when you sell your home, the buyer’s first property tax bill will often depend on whether or not you had the homestead tax credit on the home you sold.
Do you lose the homestead credit if you move into a nursing home?
You generally won’t lose your homestead credit if you move into a nursing home, assisted living facility, or similar living arrangement. Temporary absences don’t change your place of residence as long as you intend to return (or would if you were medically able) and maintain the property as your principal place of residence.
If you rent your home to someone else, you may lose your credit as the real property would likely no longer qualify as your principal residence.
Can you keep your homestead credit if you use a life estate or trust?
Arkansas generally allows you to qualify your property as a homestead when you use estate planning tools like life estates or trusts. However, the rules can be complicated and you should ask your lawyer or tax accountant before changing how you hold your property.
Can I get the homestead credit on a connected parcel?
If you have two connected parcels, they may count as one homestead property and one non-homestead property even if you use all of the land as a single residence. Contact your county tax assessor’s office if you want to combine parcels so both are treated as a single homestead property.
What is a substantial improvement?
A substantial improvement for property tax assessment purposes is generally defined as a renovation, reconstruction, or refurbishment of a property that adds 25% or more to the value of the property.
How do you apply for the Arkansas homestead tax credit?
To apply for the tax credit, contact your county tax assessor’s office.
You’ll usually need to fill out a simple form certifying that the home is your primary residence and that you’re not receiving the tax credit on another home. If you moved, you can apply immediately without violating the rule against claiming the credit twice.
What happens if you no longer qualify for the homestead tax credit?
If you no longer qualify for the homestead tax credit, such as changing your primary residence, contact your tax assessor’s office ASAP. Continuing to claim the credit when you’re not eligible could lead to owing back taxes plus penalties.
What are the rules for building new home?
In many cases, you won’t be able to take the homestead credit until you move into your new home. See New Construction Property Taxes to learn more.
If you believe you should have an exception, such as replacing your home after a fire or rebuilding a homesteaded property, talk to a tax accountant or your local tax collector.