Arkansas is considered, by many, a diverse state that offers plenty of opportunities to investors. Real estate investors have access to a wide range of locations and attractive properties, so you may spend some time looking for the perfect option.
The state is known for having affordable rates in many areas, meaning that you are more than likely to find amazing prices for certain properties. If you make the right moves, you can earn a considerable return on investment later.
However, there are many things you must evaluate before purchasing your new property, and one of those is property taxes. Property owners in Arkansas have the legal obligation to pay property taxes every year.
How do property taxes work in Arkansas, though? We'll go through all the information you need to get started on this page.
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About the Property Tax Bills in Arkansas
All property owners in Arkansas have an obligation to pay property taxes. You have to pay taxes even if you own a rental property or if the home was gifted to you. Tax bills are used to fund different public services, including law enforcement, recreational services, or local governments in general.
Each property in Arkansas is appraised by a professional designated by the state, also called a "county assessor." Your taxes would be calculated based on the assessed value of your property plus millage rates.
Another important thing that can affect your bill is that local taxing districts could adjust the property tax rates depending on their budget requirements. The Arkansas State Government website has a section where you can calculate your property taxes easily.
How Frequently Do You Have to Pay Property Taxes in Arkansas?
Your Arkansas property tax is due every year on October 15th. However, current property taxes can be made in installments. Check the details of your tax statement for instructions.
What Are the Consequences of Late Payments?
Missing the deadline will cause you to get a penalty of 10% of the base amount of your taxes plus collector's fees. On the other hand, if you don't pay your taxes for over a year after the deadline, you'll forfeit your property to the state.
Arkansas gives homeowners one year to pay their delinquent taxes, penalties, and any other expenses to "redeem their property." After that, the property will go to the Commissioner of State Lands.
How to Pay Your Property Tax Bill in Arkansas
Depending on the area, you could pay your taxes in person, by mail, or online.
Keep in mind that not all areas accept online payments.
How Much Is Property Tax in Arkansas?
Your rates will depend on the city/county, as well as your property's taxable assessed value.
However, the statewide average effective property tax rate is 0.57% according to SmartAsset. For reference, the national average is 1.11%.
How Is Property Tax Calculated in Arkansas?
Arkansas calculates your tax liability based on your assessed value and the millage rates in local taxing districts.
The assessed property value (also called taxable assessed value) for Arkansas is 20%. This means that all real and personal property will be assessed at 20% of the current market value. If you were to have a property with a market value of $100k, you would only have to pay property taxes on $20k.
Millage rates, on the other hand, are calculated by local taxing units. The rate calculates how much you must pay in taxes per $1,000 of assessed property value.
To get your final tax amount, you would have to multiply your assessed value by your millage rate.
Now, if you're eligible for exemptions, you can subtract those from the first result.
Is It Possible to Lower Your Property Taxes in Arkansas?
If you feel like your property was assessed incorrectly, you can submit an appeal. You may be able to lower your bill if you're successful with your claim.
On the other hand, you could consider the exemptions that the state offers.
Essential Exemptions in Arkansas to Consider
Homestead Property Tax Credit and Exemption
Eligible homeowners can request a tax credit of up to $375 per year. You may apply if your property is your primary place of residence. However, you may claim only one tax credit per year.
If you have a rural property that has 160 acres or less, you could apply for the homestead exemption.
Senior Citizens Exemption
People aged 65 or older may get their taxable assessed value "frozen" to the value of the property at their next assessment date. Your "frozen" value could increase if you make substantial improvements to the property.
The exemption may also apply if you're legally disabled.
Disabled Veterans Exemption
It applies to veterans whose disabilities are 100% related to their military service. These disabilities include blindness or complete disability, as well as those who lost control over one or more limbs.
About Amendment 79
According to Amendment 79, the taxable assessed value of real homestead property can increase up to 5% per year until it reaches its full assessed value. The cap increases to 10% in the case of other types of real property.
Amendment 79 doesn't apply to newly discovered real property, substantial improvements to real property, or new construction. They must be assessed at their full value.
Arkansas is one of the states with the lowest property tax rates in the country. Due to the state's low average effective property tax rate, most counties can expect lower payments. Still, remember that your taxes could vary slightly in value depending on certain scenarios.
If you were to purchase a property in Pulaski County, which is the most populous county in the state, you could expect higher property taxes compared to other areas like White County. People in Pulaski County, for example, would pay approximately $1,388 in property taxes, whereas the average homeowner in White County would pay $585.
Thankfully, calculating your Arkansas property tax isn't as complicated as in other areas in the U.S. If you have more questions surrounding your case, we suggest you talk to an advisor.
If you're looking for more tips on property management accounting, check out our whitepaper on the best tips for simplifying this complex process.