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Arkansas House votes to increase homestead tax credit by $50

By: - March 6, 2023 3:27 pm

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The Arkansas House of Representatives on Monday unanimously supported increasing the state’s homestead property tax credit from $375 to $425 a year.

The credit reduces a homeowner’s property tax liability on their primary residence.

The sponsor of the legislation, Rep. Lanny Fite (R-Benton), said that increasing sales tax collections means the state can afford to increase the credit; he has also said the additional credit could help offset rising property tax valuations.

What is the Homestead Property Tax Credit?

The Homestead Tax Credit reduces the property tax liability of homeowners by $375 per year ($425 per year under Fite’s proposal).

The credit was created by a constitutional amendment approved by voters in the 2000 general election, and the General Assembly enacted a half-cent sales tax to pay for the credit.

It is available to property owners on the property that is their primary residence, reducing their real property tax liability, which is paid at the county level.

To apply for the tax credit, taxpayers should contact their county assessor.

The Homestead Tax Credit is funded by a half-cent sales tax collected throughout the state. Since 2020, the state has increasingly collected more revenue from the dedicated sales tax than the value of credits claimed by homeowners.

Last year for example, Arkansas collected $356.4 million from the half-cent sales tax, but property owners only claimed $246.7 million in homestead tax credits, according to the Arkansas Department of Finance and Administration. Roughly 711,330 Arkansans claimed the credits, data show.

The surplus is deposited into a separate account that can be used for other purposes at the state Legislature’s discretion.

State budget officials project the $50 credit increase will cost the state $34 million in next year and $34.8 million in 2025.

The increased tax credit would take effect for this calendar year’s property tax assessments, meaning taxpayers would realize the savings in 2024 because property taxes are paid on the prior year’s assessment.

According to the Arkansas Assessment Coordination Division, “the credit is applicable to the ‘homestead’, which is defined as the dwelling of a person used as their principal place of residence… A homeowner is defined as someone who is the record owner of the property, a buyer under a recorded sales contract or a person holding a recorded life estate in the property.”

The Homestead Tax Credit was last raised in 2019, from $350 per parcel to $375.

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Hunter Field
Hunter Field

Hunter Field is a veteran Arkansas journalist whose reporting on the state has carried him from military air strips in northwest Arkansas to soybean fields in the Arkansas delta. Most recently, he was the Democrat-Gazette's projects editor, leading the newspaper's investigative team. A Memphis native, he enjoys smoking barbecue, kayaking and fishing in his free time.