Arkansas residents will get more in the form of a property tax credit going forward. Last week, the state Senate approved Gov. Sarah Huckabee Sanders’ legislation that raises the property tax credit from Arkansas for thousands of homeowners.
Property Tax Credit From Arkansas: Who Will Get It?
On Thursday, the Arkansas Senate voted 33-0 to send the bill (introduced by state Rep. Lanny Fite, R-Benton) to the governor that raises the state’s homestead property tax credit. The state House approved the same bill (HB1032) earlier this month by a 99-0 vote.
Rep. Fite noted that increasing sales tax collections suggests that the state is capable of increasing the credit, and the increased credit would help in offsetting the rising property tax valuations.
In a statement, Gov. Sanders’ spokeswoman, Alexa Henning, said the governor “was glad to work with Rep. Lanny Fite on the House Revenue and Taxation Committee to get as much relief as possible for Arkansas homeowners who are struggling because of President Biden’s disastrous economic policies that have caused record inflation and placed a burden on Arkansans.”
Once approved, the increased credit would be effective for assessment years starting on or after Jan. 1, 2023. The legislation, if it becomes law, would raise the credit from $375 to $425.
As per the state Department of Finance and Administration, the homestead property tax credit lowers the real property taxes that are due on a homeowner’s qualified homestead for each assessment year.
It must be noted that this credit applies to the “homestead,” which the Arkansas Assessment Coordination Division defines as “the dwelling of a person used as their principal place of residence.”
This increased property tax credit from Arkansas will cost the state about $34 million in the calendar year 2024 and about $34.8 million in the calendar year 2025, according to the finance department. The state granted 711,334 homestead property tax credits in the calendar year 2022.
Third Increase To This Credit
If the new rise in credit is approved, it will be the third increase to the homestead property tax credit since it came into existence over 20 years ago. This homestead property tax credit was created by Amendment 79 to the Arkansas Constitution.
In response to the rise in the credit, lawmakers also introduced a half-cent sales tax, which revenue is credited to the property tax relief trust fund. Initially, the tax credit was $300, but it was increased to $350 in 2007 and then to $375 in 2019.
In 2019, the lawmakers also introduced a measure that allows transferring the excess funds in the property tax relief trust fund to the state’s catastrophic reserve fund (earlier called the long-term reserve fund). In the 2022 calendar year, the half-cent sales tax raised $355 million of which $247 million was spent on homestead property tax credits.
This article originally appeared on ValueWalk
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