Moving from Canada to Arkansas: Taxes

Arkansas has cut its top income tax rate repeatedly over the last several years, down from 5.9% to 3.9% now, with legislators signaling more room to fall if revenue holds up. That puts Arkansas near the bottom of graduated-rate states, well below any Canadian province’s top bracket. The pull for Canadians is mostly Northwest Arkansas: Walmart’s headquarters in Bentonville has built out a dense vendor and consulting ecosystem around it, and Tyson Foods in Springdale and J.B. Hunt Transport in Lowell round out a genuinely fast-growing corridor. Little Rock adds Dillard’s and Murphy Oil to the mix. This page covers what changes because the destination is Arkansas.

How does Arkansas’s tax compare to provinces?

Arkansas’s graduated brackets top out at 3.9%, a fraction of any Canadian province’s top marginal rate.

Jurisdiction	Top rate	Notes
Ontario	~20.5% (with surtax)	On income above $220,000
BC	20.5%	On income above $252,752
Alberta	15%	On income above $355,845
Quebec	25.75%	On income above $126,000
Arkansas (state only)	3.9%	Top bracket, further cuts possible if revenue triggers keep firing

On $150,000 of employment income, Arkansas state tax alone runs roughly $4,800 to $5,300, and there’s no city or county add-on to layer on top since Arkansas has no local income taxes at all. Ontario provincial tax on the same income would run closer to $17,000 to $19,000 CAD. Arkansas comes out well ahead of any province, and the gap is wider than in most neighboring states because there’s no municipal earnings tax to claw any of it back.

Why are Canadians moving to Northwest Arkansas?

Walmart’s Bentonville headquarters has pulled in a dense cluster of vendor offices, consulting firms, and logistics companies that need to be near the retailer, turning Bentonville, Rogers, and Fayetteville into a genuine tech and retail hub. Tyson Foods in Springdale and J.B. Hunt Transport in Lowell add two more Fortune 500 anchors nearby.

For a Canadian relocating for a vendor-management, supply chain, or consulting role tied to the Walmart ecosystem, Northwest Arkansas is often the actual landing spot even when the offer letter just says “Bentonville area.” Little Rock, further south, has its own base built around Dillard’s and Murphy Oil, with a more traditional mid-size-city cost structure.

How does Arkansas treat the RRSP?

Arkansas starts from federal adjusted gross income, so it inherits whatever the treaty already resolved federally. The RRSP treaty deferral under Article XVIII keeps the account’s growth out of federal AGI while it stays deferred, and Arkansas follows along, taxing nothing until a distribution shows up in federal AGI. When distributions do occur, they flow through to the Arkansas return at the graduated state rate, capped at 3.9%.

Arkansas also exempts Social Security benefits entirely and provides a modest exemption for other retirement and pension income up to a set annual amount per taxpayer. Whether RRSP distributions qualify for that separate exemption depends on how they’re characterized on the federal return, which is worth confirming before building a retirement drawdown plan around it.

TFSA income is taxable federally with no treaty shelter and flows straight through to the Arkansas return at the same graduated rate. The standard advice to close the TFSA before you leave Canada still applies.

What happens on the Canadian side?

Leaving Canada for Arkansas triggers the same departure sequence as any Canada-to-US move:

• Deemed disposition at fair market value on worldwide property
• A final Canadian return covering January 1 through the departure date
• Provincial tax at your home province’s rates for the period you were still resident
• T1161 and, where the deemed disposition gain crosses the threshold, T1243
• Notifying the CRA of your change to non-resident status
• RRSP stays open and deferred; TFSA gets closed before departure

On the US side, the arrival-year mechanics follow the usual pattern covered in the first US tax return guide, and Arkansas’s part-year return picks up only the income earned after you became a resident.

What other taxes does Arkansas have?

• Sales tax: 6.5% at the state level, but cities and counties stack their own rates on top, pushing many areas to a combined 9% to 11% or higher, among the highest combined sales tax burdens in the country. This is the real cost of Arkansas’s low income tax, and it hits day-to-day spending harder than the income tax comparison alone would suggest.
• Property tax: low, with effective rates typically around 0.5% to 0.7% of market value. That’s below most Ontario municipalities’ 0.6% to 1.2% range and well below most other US states.
• Estate and inheritance tax: Arkansas has no state estate tax, though certain older filings tied to inheritance in specific probate situations can still surface; for most Canadians moving for employment, this isn’t a practical concern.

How does Arkansas compare to nearby states?

• Missouri: a graduated rate around 4.8%, higher than Arkansas’s 3.9%, plus Kansas City and St. Louis both add a 1% city earnings tax that Arkansas has no equivalent of anywhere in the state.
• Oklahoma: a graduated rate that runs a bit higher than Arkansas’s, built around an oil-and-gas economy rather than Arkansas’s retail-and-logistics base, with no city income taxes either.
• Tennessee: no state income tax at all, the clear winner on that single metric, but its combined sales tax runs comparably high to Arkansas’s, so the gap between the two states is smaller than the income tax headline suggests.
• Texas: no state income tax, similar to Tennessee, and a much bigger job market, but property tax rates run well above Arkansas’s, which changes the math for anyone planning to own a home.

Put side by side, Arkansas’s 3.9% top rate is genuinely competitive even against no-income-tax neighbors once sales and property tax are factored in, and it’s the strongest choice of this group for anyone who expects meaningful graduated-rate income but also plans to own property rather than rent.

What should I do next?

The Canadian exit is identical no matter which state you land in: work through the departure checklist before you go. On the Arkansas side, the state income tax number is genuinely low and there’s no local income tax layer to worry about anywhere, so the planning that matters most is around the sales tax rate in the neighborhood you settle in and whether your retirement income qualifies for the state’s pension exemption on top of the Social Security exemption.

• Departure tax checklist, the full Canadian exit sequence
• US-Canada tax treaty explained, how Article XVIII protects the RRSP
• RRSP and TFSA on a US move, what to keep open and what to close
• First US tax return after moving from Canada, the arrival-year mechanics
• Canada departure tax: T1161 and T1243, the deemed disposition forms
• State income tax for cross-border filers, how state rules generally interact with the treaty
• Moving from Canada to Missouri, the neighboring state to the north
• Moving from Canada to Oklahoma, the neighboring energy state to the west
• Moving from Canada to Tennessee, the no-income-tax neighbor to the east
• Canadian starting a business in the US, relevant if you’re bringing a company along with the move

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.