Arkansas — Personal Income Tax

Arkansas imposes a personal income tax on the entire income of every resident individual, trust, and estate. The tax is imposed under the Arkansas Income Tax Act of 1929, codified at Arkansas Code § 26-51-101 et seq. Residents are taxed on all income regardless of source or where earned. The tax is levied, collected, and paid annually on net income as defined and computed under Arkansas law, subject to graduated rates and applicable tax credits.

Source: Arkansas Individual Income Tax Regulations, § 26-51-101 et seq.

Arkansas imposes graduated personal income tax rates on net taxable income for tax year 2025. The state uses five tax brackets with rates ranging from 0% to 3.9%, indexed annually for cost-of-living under Arkansas Code § 26-51-201(d)(1) and rounded to the nearest $100. These brackets apply uniformly regardless of filing status—Arkansas does not maintain separate bracket schedules for single, married filing jointly, or other filing statuses.

2025 indexed tax brackets

The Arkansas Department of Finance and Administration published the following brackets for tax year 2025:

• 0% on net taxable income from $0 to $5,599
• 2.0% on income from $5,600 to $11,199 (minus adjustment factor $111.98)
• 3.0% on income from $11,200 to $15,999 (minus adjustment factor $223.97)
• 3.4% on income from $16,000 to $26,399 (minus adjustment factor $287.97)
• 3.9% on income from $26,400 to $94,700 (minus adjustment factor $419.96)

The adjustment factors are applied when calculating tax using the formula method; the published tax tables incorporate these adjustments directly.

Top-rate reduction effective January 1, 2025

The 3.9% top rate became effective January 1, 2025, pursuant to Act 1 of the Second Extraordinary Session of 2024, enacted June 19, 2024. This legislation reduced the top individual income tax rate from 4.4% to 3.9% retroactive to the beginning of the 2025 tax year. The reduction applied to the top two tax brackets (the 3.4% and 3.9% brackets). This was the third round of income tax rate reductions in Arkansas in 15 months.

High-income phase-out mechanism above $94,700

For net taxable income above $94,700, the 2025 indexed tax brackets publication lists a series of $100-wide income increments with progressively declining adjustment factors, stepping down from $399.30 (for income $94,701–$94,800) through intermediate amounts to lower values as income increases. Arkansas Code § 26-51-201 authorizes this graduated adjustment structure, which prevents an abrupt tax increase at the top-bracket threshold.

Annual indexing and bracket history

The 2025 brackets reflect indexing from the 2024 amounts. For comparison, the 2024 top bracket (also taxed at 3.9% following the mid-year rate reduction) began at $25,700. The $700 increase to $26,400 in 2025 results from the statutory cost-of-living adjustment applied to each bracket threshold and rounded to the nearest $100. Some tax information sources published before or shortly after January 1, 2025, cite the $25,700 threshold; that figure is the 2024 indexed threshold, not the 2025 amount.

Source: Arkansas DFA 2025 Indexed Tax Brackets

Source: Ark. Code Ann. § 26-51-201(d)(1) – cost-of-living indexing

Arkansas defines "resident" for personal income tax purposes as any person domiciled in Arkansas, or any person who maintains a permanent place of abode within Arkansas and spends in the aggregate more than six months of the taxable year in the state (Ark. Code § 26-51-102(13)). The Arkansas Department of Finance and Administration regulations interpret this as a two-prong test; satisfaction of either prong establishes residency. Domicile is acquired by physical presence at a place coupled with the intent to regard that place as a permanent home. A domicile, once established, continues until a new domicile is legally established; it does not end by lack of physical presence alone, nor by mental intent alone.

Source: Arkansas Individual Income Tax Regulations § 26-51-102

Arkansas individual income tax returns are due April 15 each year. If April 15 falls on a weekend or holiday, the return is due on the next business day. Arkansas automatically honors a federal extension without requiring a separate state extension form; when a federal extension is filed, the Arkansas due date becomes one month after the federal extension deadline, typically November 15 for individual filers. Taxpayers must check the appropriate box on their Arkansas return to claim the federal extension.

Source: Arkansas DFA Deadlines & Extensions

Arkansas imposes personal income tax on nonresidents who earn income from property (real or tangible personal property) located in Arkansas or from any business, trade, or occupation carried on in the state. Nonresidents pay tax at the same rates that apply to residents, but only on Arkansas-source income. Income derived from intangible personal property located in Arkansas—such as interest on a savings account with an Arkansas bank—is not subject to Arkansas income tax for nonresidents. A nonresident who earns Arkansas-source income must timely file an Arkansas income tax return and remit the full amount of tax due.

Source: Arkansas Individual Income Tax Regulations § 2.26-51-202(a) and § 1.26-51-202(b)(1)

Arkansas allows taxpayers to claim either a standard deduction or itemized deductions when computing net taxable income. For tax year 2025, the standard deduction is $2,410 per taxpayer ($4,820 for married filing jointly). Both spouses must elect the same method—if one spouse itemizes, both must itemize, regardless of whether they file jointly or separately.

Indexing and statutory base

The standard deduction is indexed annually for inflation by the Arkansas Secretary of the Department of Finance and Administration using a cost-of-living adjustment based on the Consumer Price Index for All Urban Consumers published by the U.S. Department of Labor, rounded to the nearest $10.00. The statutory base amount, established for tax years beginning on or after January 1, 2015, is $2,200 per taxpayer under Arkansas Code § 26-51-430. Annual indexing increased the amount from $2,340 for tax year 2024 to $2,410 for tax year 2025.

If the Consumer Price Index for a calendar year does not exceed the prior year's index, the standard deduction is not adjusted for that year.

Personal tax credits

Arkansas does not have a personal exemption or dependent deduction as used in federal income tax. Instead, Arkansas provides nonrefundable personal tax credits under Arkansas Code § 26-51-501. For 2025, the credit is $29 per person for:

• Each taxpayer
• Each dependent
• Taxpayers age 65 or older (the "65 Special" credit, available to those not claiming a retirement income exemption)
• Blind taxpayers
• Deaf taxpayers
• Head of household or qualifying widow(er) status

The statutory credit amount is $26, but it is indexed annually for inflation, bringing it to $29 for the 2025 tax year. These credits reduce tax liability dollar-for-dollar but are not refundable—they cannot reduce tax below zero.

Itemized deductions

Taxpayers whose deductible expenses exceed the standard deduction may claim itemized deductions on Arkansas Form AR3. Arkansas itemized deductions are similar to federal itemized deductions but not identical—Arkansas tax law adopts certain Internal Revenue Code sections as in effect on specific dates. For example, Arkansas adopts IRC § 170 (charitable contributions) as in effect on January 1, 2019, and IRC § 163 (interest expense) as in effect on January 1, 2017. Arkansas income taxes themselves are not deductible under Arkansas Code § 26-51-416.

Source: Arkansas DFA Withholding Tax Formula for Tax Year 2025

Source: Arkansas DFA 2025 Estimated Tax Declaration (AR1000ES)

Arkansas filing requirements differ for full-year residents, part-year residents, and nonresidents. Residents face income-based thresholds that vary by filing status, while part-year residents and nonresidents must file if they received any gross income from relevant sources, with no minimum threshold.

Full-year residents — income thresholds by filing status

Arkansas full-year residents must file an individual income tax return (Form AR1000F) if their gross income for the tax year equals or exceeds indexed thresholds that vary by filing status and number of dependents. For tax year 2025, the Arkansas Department of Finance and Administration set the following gross income thresholds:

• Single (Filing Status 1): $14,644
• Married filing jointly (Filing Status 2):
• With one or no dependents: $24,696
• With two or more dependents: $29,755
• Head of household or surviving spouse (Filing Status 3 or 6):
• With one or no dependents: $20,810
• With two or more dependents: $25,300
• Married filing separately (Filing Status 4 or 5): $14,644 per spouse

These thresholds are indexed annually for inflation under Arkansas law using a cost-of-living adjustment based on the Consumer Price Index. The threshold amounts increased from the 2024 tax year; for example, the single-filer threshold rose from approximately $14,260 in 2024 to $14,644 in 2025.

Definition of gross income for threshold purposes

Gross income for purposes of determining whether a filing requirement exists includes income from all sources before deductions, exemptions, or adjustments. This definition is broader than "Arkansas taxable income" — it includes items that may be exempt from Arkansas income tax (such as Social Security benefits and certain retirement income) for the purpose of determining whether the threshold is met. Once the threshold is exceeded, the taxpayer must file a return and claim any applicable exemptions on the return itself.

Part-year residents — must file if any gross income while resident

Part-year residents who received any gross income while an Arkansas resident must file a return (Form AR1000NR) regardless of the amount. A part-year resident is any individual who established domicile in Arkansas during the tax year (moved into the state) or who moved out of Arkansas and established domicile elsewhere during the tax year. There is no filing threshold exemption for part-year residents, unlike the income-based thresholds that apply to full-year residents.

The "any gross income" rule applies to income received during the period of Arkansas residency, regardless of source or where earned. A part-year resident with even $1 of income (from wages, interest, dividends, capital gains, or any other source) during the Arkansas-residency portion of the year has a filing obligation.

Nonresidents — must file if any Arkansas-source gross income

Nonresidents who received any gross income from Arkansas sources must file Form AR1000NR regardless of the amount. Arkansas-source income for nonresidents includes income from property (real or tangible personal property) located in Arkansas or from any business, trade, or occupation carried on in the state. Income derived from intangible personal property located in Arkansas — such as interest on a savings account with an Arkansas bank — is not subject to Arkansas income tax for nonresidents and does not create a filing requirement.

Common examples of Arkansas-source income that trigger a nonresident filing requirement include wages for work performed in Arkansas, income from rental property located in Arkansas, business income from a trade or business conducted in the state, and distributive shares of income from pass-through entities doing business in Arkansas. Even a single day of work performed in Arkansas that generates compensation creates a filing obligation, though the practical enforcement of such minimal obligations varies.

Voluntary filing below the threshold

Even if gross income falls below the applicable threshold (for residents) or is zero (for nonresidents and part-year residents who had no relevant income), an individual may benefit from filing a return to claim a refund of Arkansas income tax withheld from wages, or to claim refundable or nonrefundable credits available under Arkansas law, such as the Additional Tax Credit for Qualified Individuals or the Credit for Tax Paid to Another State. Arkansas law requires filing a complete return to claim any refund due, even when the taxpayer's income is below the mandatory filing threshold.

Source: Arkansas Individual Income Tax Forms and Instructions for Tax Year 2025 (AR1000F / AR1000NR)

Source: Arkansas DFA Subject 100 — Who Must File

Arkansas taxes part-year residents using a proration method that applies the full Arkansas rate structure to all income and then apportions the resulting tax liability based on time spent as a resident. A part-year resident is any individual who established domicile in Arkansas during the tax year (moved into the state) or who moved out of Arkansas and established domicile elsewhere during the tax year.

Income subject to Arkansas tax

Part-year residents are taxed on all income received while an Arkansas resident, regardless of source or where earned. This includes income from work performed outside Arkansas, investment income from accounts held elsewhere, and any other income received during the residency period. The residency period is determined by when the taxpayer established or abandoned Arkansas domicile, not simply physical presence.

Computation method—no separate proration of deductions

Arkansas uses a three-step computation method for part-year residents under Arkansas Code § 26-51-435:

1. Compute taxable income as if all income were earned in Arkansas. The part-year resident calculates adjusted gross income from all sources (both Arkansas-period income and income from other states), claims the full standard deduction or itemized deductions without proration, and arrives at net taxable income exactly as a full-year resident would.

1. Compute the tax liability on that amount using Arkansas rates. The part-year resident applies the Arkansas graduated rate schedule to the net taxable income computed in step one, then subtracts all allowable tax credits (personal credits, credits for dependents, etc.) without proration to determine a preliminary tax liability.

1. Prorate the tax by the Arkansas-resident income ratio. The part-year resident divides adjusted gross income received while an Arkansas resident by adjusted gross income from all sources to determine an apportionment percentage. This percentage is then multiplied by the preliminary tax liability from step two to determine the final Arkansas tax due.

Standard deduction and credits—taken in full before proration

The Arkansas standard deduction ($2,410 per taxpayer for 2025, or $4,820 for married filing jointly) is not separately prorated for part-year residents. Instead, the part-year resident claims the full standard deduction (or full itemized deductions) when computing the taxable income base in step one, and only the resulting tax liability is prorated in step three. Similarly, personal tax credits ($29 per person for 2025) are claimed in full before the proration percentage is applied.

This method ensures that the Arkansas tax burden on a part-year resident reflects the Arkansas rate structure applied to the taxpayer's full economic position, scaled by the portion of the year spent as an Arkansas resident.

Form and filing requirement

Part-year residents must file Form AR1000NR (the same form used by nonresidents). The form has three income columns: Column A reports income from all sources, Column B (if applicable) reports the spouse's income when married filing separately on the same return, and Column C reports only the income received while an Arkansas resident. The taxpayer must indicate the dates lived in Arkansas and the state of residence for the non-Arkansas portion of the year on page 1 of the form.

Any part-year resident who received gross income while an Arkansas resident must file Form AR1000NR regardless of the amount—there is no filing threshold exemption for part-year residents, unlike the income-based thresholds that apply to full-year residents.

Source: Arkansas Individual Income Tax Regulations, 26 CAR § 100-137 (Nonresidents or part-year residents — Arkansas Code § 26-51-435)

Source: Arkansas Department of Finance and Administration, 2025 Individual Income Tax Forms and Instructions (AR1000F / AR1000NR)

Arkansas provides two alternative tax tables for computing personal income tax liability: the Regular Tax Table and the Low Income Tax Table. The Low Income Tax Table is a simplified computation method available only to taxpayers whose total gross income from all sources (regardless of Arkansas taxability) falls below specified thresholds and who meet certain other eligibility requirements. The Arkansas Department of Finance and Administration publishes both tables annually.

What the Low Income Tax Table is

The 2025 Tax Tables publication states: "NOTE: The standard deduction is incorporated into the low income tax table. You can not use this table if you take the standard deduction or if you itemize your deductions in calculating your net taxable income." A taxpayer who qualifies to use the Low Income Tax Table looks up their adjusted gross income and filing status directly in the table to find tax liability—no separate subtraction of the standard deduction is required. The table applies Arkansas's graduated rate structure but builds the standard deduction ($2,410 per taxpayer for 2025, or $4,820 for married filing jointly) into the lookup calculation itself.

Eligibility thresholds

The Low Income Tax Table can be used with Forms AR1000F (resident return) and AR1000NR (nonresident/part-year-resident return). The 2025 Tax Tables publication directs the taxpayer to "use the income lines listed for each particular form below along with your filing status to see if you qualify to use this tax table." Eligibility turns on total gross income from all sources, including income that is exempt from Arkansas tax. Arkansas Code § 26-51-301(g) provides that "for the purpose of determining eligibility for the low-income tax credit in this section, income from all sources shall be used in determining the gross income of the taxpayer regardless of whether the income is taxable in Arkansas."

The Arkansas Department of Finance and Administration's publication "Subject 500 — Choosing the Correct Table" provides historical threshold guidance. For prior tax years, the gross income threshold for a single taxpayer was $13,900, and for married filing jointly with two or more dependents, the threshold was $25,100. These thresholds are indexed annually for cost-of-living under Arkansas Code § 26-51-301(e). The 2025 thresholds follow the same statutory indexing framework; the Low Income Tax Table itself lists AGI ranges beginning at zero and extending up to the point at which a taxpayer must switch to the Regular Tax Table. A taxpayer whose AGI exceeds the highest AGI row in the Low Income Tax Table for their filing status must use the Regular Tax Table.

Restrictions on use — who must use the Regular Tax Table instead

Even if a taxpayer's gross income falls below the applicable threshold, the taxpayer is prohibited from using the Low Income Tax Table if any of the following apply:

• Itemized deductions are claimed. The 2025 Tax Tables state, "You must use this tax table if you itemize your deductions," referring to the Regular Tax Table. Arkansas Code § 26-51-301(h) disqualifies a taxpayer who itemizes deductions from the low-income tax credit underlying the Low Income Tax Table. A taxpayer who separately itemizes on Form AR3 must use the Regular Tax Table and compute tax on net taxable income (adjusted gross income minus itemized deductions).

• The standard deduction is taken separately in computing net taxable income. The 2025 Tax Tables state, "Be sure to subtract line 27 (standard deduction or your itemized deductions) from line 25 before using the Regular Income Tax Table." If a taxpayer subtracts the standard deduction on line 27 to arrive at net taxable income on line 28, that taxpayer must use the Regular Tax Table. The Low Income Tax Table works directly from AGI (before any deduction subtraction); taking the standard deduction separately and then using the Low Income Tax Table would double-count the deduction.

• Certain exemptions are claimed. Arkansas Code § 26-51-301(h) provides that a taxpayer is not eligible for the low-income tax credit if the taxpayer claims an exemption under Arkansas Code § 26-51-306 or § 26-51-307. Section 26-51-306 includes the military retirement income exemption and combat pay exclusions. Section 26-51-307 governs the retirement income exemption (the $6,000 pension/IRA exemption). A taxpayer who claims the retirement income exemption, the military retirement exemption, or who checks the "65 Special" box on the return (a low-income senior benefit election) must use the Regular Tax Table instead.

• Married couples must both use the same table. The 2025 Tax Tables state, "Married couples must use the same filing status and tax table. If one spouse uses the Regular Income Tax Table, then both must use the Regular Income Tax Table." This coordination rule applies when married taxpayers file separately on the same return (Filing Status 4 or 5). If one spouse's circumstances require use of the Regular Tax Table (for example, because that spouse itemizes deductions or claims the retirement income exemption), the other spouse must also use the Regular Tax Table, even if that spouse's income alone would qualify for the Low Income Tax Table.

Computation under the Low Income Tax Table versus the Regular Tax Table

Under the Low Income Tax Table, the taxpayer:

1. Determines adjusted gross income from all sources (reported on line 25 of Form AR1000F or AR1000NR, Column A).
2. Locates the AGI range row and the filing-status column in the Low Income Tax Table that corresponds to the taxpayer's circumstances. The table displays separate columns for different numbers of dependents.
3. Reads the tax liability amount directly from the table cell. The standard deduction is already incorporated into this amount.
4. Subtracts personal tax credits (line 30 of the return) to arrive at net tax. For 2025, the personal tax credit is $29 per eligible person (taxpayer, spouse, dependents, and qualifying special-status credits for age 65, blind, deaf, head of household, or qualifying widow(er)).

Under the Regular Tax Table, the taxpayer:

1. Determines adjusted gross income (line 25).
2. Subtracts the standard deduction or itemized deductions (line 27) to compute net taxable income (line 28).
3. Locates the net taxable income range row and the filing-status column in the Regular Tax Table.
4. Reads the tax liability from the Regular Tax Table.
5. Subtracts personal tax credits (line 30) to arrive at net tax.

The structural difference is that the Low Income Tax Table works directly from AGI and incorporates the standard deduction automatically, while the Regular Tax Table requires the taxpayer first to compute net taxable income by manually subtracting either the standard deduction or itemized deductions. The Arkansas Department of Finance and Administration explains this in the instructions to both tables: the Low Income Tax Table notation states "The standard deduction is incorporated into the low income tax table," and the Regular Tax Table instructions state "Be sure to subtract line 27 (standard deduction or your itemized deductions) from line 25 before using the Regular Income Tax Table."

Statutory and regulatory basis

The Low Income Tax Table and the low-income tax credit are governed by Arkansas Code § 26-51-301, titled "Individuals exempt from taxation or qualifying for low-income tax credit." Subsection (c) defines income thresholds that qualify a taxpayer for a low-income tax credit. Subsection (e) requires annual indexing of those thresholds by a cost-of-living adjustment tied to the Consumer Price Index for All Urban Consumers, rounded to the nearest whole dollar. Subsection (f) prescribes a formula for computing the credit amount—80% of the tax due on the threshold income amount, reduced by $4 for each $100 (or fraction thereof) that the taxpayer's gross income exceeds the indexed threshold. Subsection (g) specifies that all income (taxable and nontaxable in Arkansas) counts toward the gross income test. Subsection (h) lists disqualifications: a taxpayer who itemizes deductions or who claims an exemption under § 26-51-306 or § 26-51-307 is not eligible for the low-income tax credit.

The Arkansas Department of Finance and Administration implements these provisions through the annually published tax tables and instructions. For 2025, the implementation takes the form of the Low Income Tax Table (which embeds the standard deduction and the low-income tax credit calculation into a single lookup operation) and the Regular Tax Table (which taxpayers use after computing net taxable income). The DFA also publishes "Subject 500 — Choosing the Correct Table," a reference document explaining when each table applies and summarizing eligibility thresholds and disqualifiers.

Source: Arkansas Department of Finance and Administration, 2025 Tax Tables (Low Income Tax Table and Regular Tax Table)

Source: Arkansas Department of Finance and Administration, Subject 500 — Choosing the Correct Table

Arkansas residents may exempt up to $6,000 of retirement income from Arkansas personal income tax under Arkansas Code § 26-51-307. This exemption is available separately to each taxpayer — a married couple filing jointly can claim up to $12,000 in total retirement exemptions if both spouses receive qualifying retirement income. The exemption covers distributions from individual retirement accounts (IRAs) and benefits from public or private employment-related retirement systems, plans, or programs, regardless of how they are funded.

Qualifying retirement income

The $6,000 exemption applies to two categories of retirement income:

• IRA distributions. The first $6,000 of benefits received from an individual retirement account qualifies for the exemption. Only distributions received after the participant reaches age 59½ are eligible. Distributions before age 59½ qualify only if made on account of the participant's death or disability.

• Employment-related retirement benefits. The first $6,000 of benefits received from public or private employment-related retirement systems, plans, or programs qualifies, regardless of the funding method. This includes traditional pension plans, defined-contribution retirement plans (such as 401(k) or 403(b) plans), and other employer-sponsored retirement arrangements.

Arkansas Code § 26-51-307(b)(1)(A) specifies that the exemption for IRA distributions and employment-related retirement benefits "is the only exemption from the state income tax allowed" for such income, except for benefits that federal law exempts from state income tax and the separate military retirement exemption described below. A taxpayer cannot receive an exemption greater than $6,000 during any tax year under this section, except as provided for military retirement.

Military retirement income — full exemption

Beginning with tax year 2018, Arkansas Code § 26-51-307(e) provides a full exemption — with no dollar cap — for retirement benefits and survivor benefits received by a member of the uniformed services. The uniformed services include the United States Army, Marine Corps, Navy, Air Force, Coast Guard, and reserve components of those services. This exemption covers the entire amount of military retirement pay, regardless of how much the retiree receives.

A taxpayer claiming the military retirement exemption under subsection (e) is not eligible to claim the $6,000 general retirement exemption under subsection (a) for the same income. However, Arkansas Code § 26-51-307(f)(2) allows a taxpayer whose military retirement or survivor benefits are less than $6,000 to claim additional retirement income exemptions under subsection (a) — for example, from a traditional IRA or a civilian employment pension — in an amount equal to the difference between the military retirement exemption and $6,000. This "top-up" rule ensures that every qualifying taxpayer can exempt at least $6,000 of total retirement income.

Interaction with cost basis recovery

Arkansas Code § 26-51-307(c)(1) specifies that IRC § 72, as in effect on January 1, 2009, is the sole method by which a recipient of IRA or employment-related retirement benefits may deduct or recover the cost of contributions to the plan when computing Arkansas income. Under IRC § 72, a portion of each distribution is treated as a nontaxable return of the taxpayer's after-tax contributions (basis), and the remainder is taxable income. Arkansas applies this same rule. The $6,000 exemption under § 26-51-307(a) is claimed against the portion of the distribution that would otherwise be taxable under IRC § 72 after recovery of basis.

Effect on other tax benefits

A taxpayer who claims the retirement income exemption under Arkansas Code § 26-51-307 is disqualified from using the Low Income Tax Table. Arkansas Code § 26-51-301(h) excludes from the low-income tax credit anyone who claims an exemption under § 26-51-307. The Arkansas Department of Finance and Administration's Subject 500 publication and the annual Tax Tables booklet confirm this disqualification: "If you use an exemption for military compensation, military retirement or employment related pension income, you do not qualify" for the Low Income Tax Table.

Individuals age 65 or older who do not claim the $6,000 retirement income exemption are entitled to an additional personal tax credit (the "65 Special" credit) of $29 for tax year 2025 (indexed annually). A taxpayer cannot claim both the retirement income exemption and the age-65 special credit; the taxpayer must choose one or the other. This is the same personal tax credit discussed in the "Standard deduction and personal tax credits" section of this guide.

Claiming the exemption

A taxpayer claims the retirement income exemption on Arkansas Form AR4, Part III, which lists exempt income. The Arkansas Department of Finance and Administration's Subject 206 publication, "Pensions and Annuities," explains: "If your pension was less than $6,000, you can only use the exclusion to the extent of your pension income. Your spouse receives a separate $6,000 exclusion if he or she also had income from an employer sponsored pension plan." The exemption is claimed per taxpayer, not per return.

Effective date of military retirement exemption expansion

The full exemption for military retirement income (with no $6,000 cap) became effective for tax years beginning on or after January 1, 2018, pursuant to Act 141 of 2017. Before 2018, military retirees were subject to the same $6,000 cap as other retirees. Act 358 of 2023, effective for tax years beginning on or after January 1, 2023, amended subsection (f) to allow military retirees receiving less than $6,000 in military retirement to claim the difference under the general retirement exemption for other retirement income, ensuring the full $6,000 benefit. The Arkansas Department of Finance and Administration's "What's New?" page states: "This allows taxpayers receiving military retirement or survivor benefits to receive the total amount of the $6,000 retirement exemption."

Source: Arkansas DFA Subject 206 — Pensions and Annuities (revised Feb. 24, 2023)

Source: Arkansas DFA Subject 500 — Choosing the Correct Table

Source: Arkansas DFA What's New?

Source: Arkansas DFA 2025 Tax Tables

Arkansas allows residents and part-year residents to claim a credit against their Arkansas personal income tax for income taxes paid to another state or territory when both jurisdictions tax the same income. This credit prevents double taxation of income earned outside Arkansas. Nonresidents are not eligible for the credit.

Eligibility — residents and part-year residents only

The credit is available only to Arkansas residents and part-year residents. Arkansas Code § 26-51-504(a)(1)(A) provides that an individual resident of Arkansas whose gross income includes income derived from property located outside Arkansas or from business transacted outside the state may claim a credit "for the amount of income tax actually owed by the resident for the year to any other state or territory on account of income from property owned or business transacted in the other state or territory."

Nonresidents who file Arkansas returns are not eligible to claim this credit, because they are taxed only on Arkansas-source income — they do not face double taxation of the same income by Arkansas and their home state. The Arkansas Department of Finance and Administration's Instructions for AR1000TC (2024 Tax Credits Schedule) state: "The purpose of the other state tax credit is to prevent Arkansas residents from being taxed twice on income earned outside of the state of Arkansas. Nonresidents cannot claim this credit on their Arkansas return."

Limitation — lesser of actual tax or Arkansas rate on outside income

The credit cannot exceed the lesser of two amounts:

1. The actual tax liability paid to the other state. The taxpayer must prove the amount of income tax actually owed to the other state for the tax year, not merely the amount withheld. Arkansas Code § 26-51-504(b) requires the taxpayer to file with the Arkansas return "any such additional information as the Director of the State Income Tax Division or the Secretary of the Department of Finance and Administration may by rule require showing in detail the amount of gross and net income derived from property owned or business transacted without this state, together with the amount of tax actually owed on the income to another state or territory." A complete copy of the other state's tax return must be attached to the Arkansas return to verify the tax liability. The AR1000TC Instructions warn: "The amount withheld on your W-2 form for the other state is not the amount of credit you should take."

1. The Arkansas tax on the outside income, computed at Arkansas rates. Arkansas Code § 26-51-504(a)(1)(A) states: "However, credit shall not exceed what the tax would be on the outside income, if added to the Arkansas income, and calculated at Arkansas income tax rates." This limitation ensures that the credit does not reduce Arkansas tax liability below what the taxpayer would owe if all income were Arkansas-source income.

The AR1000TC Instructions provide a three-step calculation method to determine the Arkansas tax on outside income:

• Step 1: Calculate on an AR1000F what the taxpayer's Total Tax (line 29 of the AR1000F) would be with everything included as normal — both Arkansas income and the other states' income, with all losses included.

• Step 2: Temporarily redo the AR1000F but with all the other states' income and losses removed. Make a note of the Total Tax (line 29) from this second computation.

• Step 3: Subtract the Total Tax in Step 2 from the Total Tax in Step 1. This shows exactly how much effect the other states' income had on Arkansas taxes — this is how much the tax would be on the outside income if added to Arkansas income and taxed at Arkansas rates.

The credit is the lesser of the actual tax paid to the other state (from the attached other-state return) or the Arkansas-rate tax on the outside income (from the three-step calculation). The AR1000TC Instructions state: "The credit amount is the lesser of the two (2) amounts below: 1. Either the actual tax liability amount from outside states, [or] 2. [the Arkansas tax on the outside income]."

Qualifying taxes — income taxes on or measured by net income

The credit is available for taxes that constitute "income tax actually owed" to another state or territory. Arkansas Code § 26-51-504(a)(1)(A) uses the phrase "income tax," and the Arkansas regulation at 26 CAR § 100-142 provides further guidance on the computation of the credit for income from sources outside Arkansas. The statute does not define "income tax" in detail, but it restricts the credit to taxes on income from property or business transacted in the other jurisdiction, consistent with a net-income measure.

Arkansas does not allow a credit for taxes that are not income taxes. The AR1000TC Instructions provide one specific example: "NOTE: The State of Mississippi enacted a special tax that applies exclusively to gambling winnings. This tax is separate and distinct from Mississippi's income tax. As such, an Arkansas taxpayer cannot claim a credit against their Arkansas income tax liability for payment of the gambling winnings tax to the State of Mississippi."

Arkansas Code § 26-51-504 applies only to taxes paid to another U.S. state or territory. The AR1000TC Instructions state: "This credit is not allowed for income taxes paid to foreign countries."

Part-year residents — credit available for income taxed by both jurisdictions

Part-year residents may claim the credit for taxes paid to another state on income that is taxed by both Arkansas and the other state. The regulation at 26 CAR § 100-142 is titled "Income from sources outside Arkansas — Arkansas Code § 26-51-504" and governs the computation of the credit for both residents and part-year residents.

A part-year resident who earns income outside Arkansas while an Arkansas resident, and who pays tax on that income to another state, may claim a credit if Arkansas also taxes that income. For example, a taxpayer who establishes Arkansas domicile mid-year and continues to earn income in a prior state of residence may owe tax to both states on income earned after becoming an Arkansas resident. In that situation, the taxpayer may claim a credit for the other state's tax on the income that is taxed by both Arkansas and the other state, subject to the limitations described above.

Conversely, a part-year resident who earned income in another state while a nonresident of Arkansas (before establishing Arkansas domicile) would not claim a credit for tax paid to that state on pre-residency income, because Arkansas does not tax income earned while the taxpayer was a nonresident.

Fiduciaries and partnerships

Arkansas Code § 26-51-504(c) provides: "The credit against Arkansas income tax afforded individual residents of Arkansas under this section shall also be available to fiduciaries and partnerships residing or domiciled in Arkansas which are subject to Arkansas income tax or which have to report income for purposes of Arkansas income tax." This provision extends the credit to trusts, estates, and partnerships that are Arkansas residents and that pay income tax to another state on income also taxed by Arkansas.

Documentation and filing requirements

To claim the credit, a taxpayer must:

• Complete Form AR1000TC (Arkansas Individual Income Tax Credits Schedule) and attach it to the Arkansas return.
• Attach a complete copy of the other state's tax return to the Arkansas return. The AR1000TC Instructions state: "You must attach a complete copy of the other state's tax return to verify the tax liability due the other state." The instructions further warn: "If the other state return is not included, the credit may be disallowed."
• Provide any additional information required by the Arkansas Department of Finance and Administration showing in detail the amount of gross and net income derived from sources outside Arkansas and the amount of tax actually owed to the other state, as specified in Arkansas Code § 26-51-504(b).

Nonrefundable credit

The credit for taxes paid to another state is a nonrefundable credit against Arkansas tax liability. The AR1000TC Instructions state: "The credit for taxes paid to another state is a nonrefundable credit against your tax liability." The credit can reduce Arkansas tax liability to zero but cannot generate a refund. Any excess credit that cannot be used in the current year is lost — Arkansas does not permit carryforward of unused other-state tax credits.

Source: Arkansas Code § 26-51-504 (credit for income taxes paid to another state)

Source: 26 CAR § 100-142 (Income from sources outside Arkansas — Arkansas Code § 26-51-504)

Source: Arkansas DFA Instructions for AR1000TC (2024 Tax Credits Schedule)