Does Arkansas Tax Social Security and Retirement Income?

Arkansas does not tax Social Security

Arkansas exempts Social Security benefits from income tax. The return instructions list Social Security benefits, VA benefits, workers’ compensation and Railroad Retirement benefits together as income that is exempt from tax, with no income limit and no age requirement. Tier I, tier II, vested dual benefits and supplemental annuity payments from the Railroad Retirement Board are all covered; a private pension from a railroad company reported on Form 1099-R is not. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

Form AR1000F does not begin with federal adjusted gross income. Income is entered item by item on lines 8 through 22, and there is no line for Social Security, so the part of a benefit that is taxed on the federal return never appears. In our three example households, $25,500, $46,750 and $59,500 of federally taxed benefits stay off the Arkansas return. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

The federal government is a separate matter. Up to 85% of a benefit can be taxed on a federal return once other income passes fixed thresholds, wherever you live. Our taxable Social Security calculator shows how much of yours is counted.

The first $6,000 of each person’s pension is exempt; military retirement is exempt in full

The first $6,000 a year of income from an employer-sponsored retirement plan is exempt. The instructions apply this to distributions from public or private employment-related retirement systems, plans or programs, so a corporate pension, a federal civil service annuity and a pension from another state’s system are treated alike. The recipient does not have to be retired, the payment can be a lump sum or installments, and disability retirement that is not already exempt under the federal code qualifies. After-tax contributions are recovered first under the federal rules, and the $6,000 comes off what is left. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

The exemption is per taxpayer, not per return. The primary filer’s retirement income goes on line 18A and the spouse’s on line 18B, each with its own $6,000, whether the couple files jointly or separately on the same return. In our first couple one spouse has $55,000 of pension and IRA income and the other $15,000; each exempts $6,000, and $58,000 is taxed. A spouse with no retirement income has nothing to apply the exemption to, and a surviving spouse is limited to a single $6,000. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

Military retirement is treated differently. Since tax year 2018, retirement benefits received by a member of the uniformed services have been exempt in full; the gross amount is entered beside line 17 and none of it is taxed. A retiree whose military exemption is more than $6,000 cannot also claim the $6,000 exemption for a civilian pension or an IRA. If the military exemption is less than $6,000, the remainder can be used against that other retirement income. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

IRA withdrawals after 59½ share the same $6,000 exemption

A traditional IRA distribution taken after age 59½ qualifies for the $6,000 exemption, and so does an earlier one made because of the owner’s death or disability. It is not a second exemption: the instructions state that the total from employer plans and IRAs cannot exceed $6,000 per taxpayer. The single retiree in our examples, with a $20,000 pension and $20,000 of IRA withdrawals, exempts $6,000 and is taxed on $34,000. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

Other early withdrawals do not qualify, including those taken for medical expenses, higher education or a first home. They are reported on line 16 with federal Form 5329, and Arkansas adds its own charge of 10% of the federal additional tax on line 32. Someone who owes the 10% federal penalty on a $20,000 early withdrawal, $2,000, owes Arkansas another $200 on top of the regular tax. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

On Roth accounts, the Department’s guidance says distributions and accumulated earnings are exempt from income if the funds were held at least five years and are paid after age 59½, and that converting a traditional IRA to a Roth results in taxable income at the time of conversion. (Arkansas Department of Finance and Administration, Subject 300: Traditional Individual Retirement Accounts (IRAs) and Roth IRAs)

The return instructions do not mention conversions when they describe the $6,000 exemption; they describe a traditional IRA distribution received after 59½. For most retirees the point is moot, because the cap is $6,000 a year from all plans and ordinary pension payments or withdrawals have usually used it. A $50,000 conversion on top of that is taxed in full, which at the 3.7% rate is $1,850. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

To size a conversion against federal brackets and Medicare surcharges, see the Roth conversion calculator; for required withdrawals, the RMD calculator.

Interest and dividends are taxed in full; half of a long-term capital gain is excluded

Interest and dividends are entered on lines 10 and 11 and taxed at ordinary rates, with Form AR4 required when either totals $1,500 or more. Interest on direct obligations of the United States and on obligations of Arkansas and its political subdivisions is exempt, including government interest passed through a mutual fund. Arkansas has no lower rate for qualified dividends. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

Capital gains are figured on Form AR1000D. Only 50% of a net long-term capital gain is taxed, which makes the top rate on such a gain 1.85% in 2026, while a short-term gain is taxed in full. Net capital gain above $10,000,000 is exempt altogether. A net capital loss is deductible up to $3,000 a year, or $1,500 for each spouse when a couple files separately. (Arkansas Department of Finance and Administration, Form AR1000D: Capital Gains (2025))

Gain on the sale of a principal residence is exempt up to $250,000 per taxpayer, or $500,000 for a married couple filing on the same return, if the home was owned and used as the principal residence for periods totaling two years or more in the five years before the sale. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

Our example households have a single figure for long-term capital gains and qualified dividends, and only the gains would qualify for the 50% exclusion, so the examples tax the whole amount as ordinary income. If the $40,000 in the third household were all net long-term gain, $20,000 would drop out on line 8 of Form AR1000D and the couple’s tax would be about $740 lower. (Arkansas Department of Finance and Administration, Form AR1000D: Capital Gains (2025))

Act 2 of the First Extraordinary Session of 2026, approved May 6, 2026, lowered the top individual rate from 3.9% to 3.7% for tax years beginning on or after January 1, 2026. For net income of $94,700 or less the table is 0% up to $5,599, 2% up to $11,199, 3% up to $15,999, 3.4% up to $26,399 and 3.7% above that. The same table applies to every filing status. (Arkansas General Assembly, Act 2 of the First Extraordinary Session of 2026 (Ark. Code 26-51-201(a)(4): rates for tax years beginning on or after January 1, 2026))

A taxpayer with net income above $94,700 uses a second table, which the table above does not show: 2% on the first $4,700 and 3.7% on everything else, with no band at 0%. That costs about $287 more than the first table would. A bracket adjustment softens the change: $290 comes off the tax at $94,701 to $94,800, and the adjustment shrinks by $10 for each further $100 of income until it is gone above $97,600. Inside that $2,900 band each additional $100 of income adds about $13.70 of tax. (Arkansas General Assembly, Act 2 of the First Extraordinary Session of 2026 (Ark. Code 26-51-201(a)(4): rates for tax years beginning on or after January 1, 2026))

The Department’s estimated tax worksheet for 2026, revised on the day Act 2 was approved, uses a standard deduction of $2,470 per taxpayer and personal tax credits of $29, the same amounts as the 2025 return, and gives the tax on net taxable income of $100,000 or more as $3,618 plus 3.7% of the excess. The 2026 return booklet had not been published when this page was reviewed, so those are the figures the examples use. (Arkansas Department of Finance and Administration, Form AR1000ES: Estimated Tax Declaration Vouchers and Instructions for Tax Year 2026 (worksheet revised May 6, 2026))

Arkansas adjusts its bracket thresholds for inflation each year. The Department’s 2025 Indexed Tax Brackets sheet shows the same thresholds that Act 2 wrote into the 2026 table, and no 2026 sheet had been posted as of November 14, 2026. The thresholds and the standard deduction printed in the 2026 return could therefore differ somewhat from the ones shown here. (Arkansas Department of Finance and Administration, 2025 Indexed Tax Brackets)

Married couples have a choice the table cannot show. Under Filing Status 4, married filing separately on the same return, each spouse lists their own income in column A or B, takes their own $2,470 standard deduction, looks up their own tax, and the two are added. The instructions say this may reduce the tax when both spouses had income, because each spouse’s income starts again at the bottom of the brackets. A couple must file jointly if one spouse’s total income is negative. Our examples compute both ways and use the lower result, splitting jointly held interest and gains evenly: the first couple owes $1,884 separately and $2,220 jointly. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

The printed tax table covers net taxable income under $100,001 in $100 bands and taxes each band at its midpoint, so a return can differ from an exact calculation by a dollar or two; the examples here work the same way. There are also Low Income Tax Tables with the standard deduction built in. Married couples must file jointly to use them, and they are closed to anyone who claims the pension, IRA or military exemptions, although a taxpayer may give up the exemption to use them. The example households’ incomes are far above their limits. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

Arkansas uses personal tax credits in place of exemptions. Each taxpayer and spouse gets one $29 credit, and a second for being 65 or over on January 1 following the tax year. A third credit, the 65 Special, goes to a taxpayer 65 or over who does not claim a retirement income exemption on line 18. A couple who are both 65 and both drawing pensions subtract $116 from their tax. The credits cannot reduce the tax below zero. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

The 65 Special and the retirement exemption are alternatives, and the exemption is almost always the larger. Exempting $6,000 saves $222 for someone taxed at 3.7%, against $29 for the credit. The credit matters for a 65-year-old with no pension or IRA income at all, such as someone living on Social Security and savings. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

The most valuable age-based break is on the home. A homeowner who qualifies for the homestead credit and is 65 or older, or disabled, can have the taxable assessed value of the homestead frozen at its value on the next assessment date after turning 65 or becoming disabled. The owner has to apply to the county assessor, and the freeze does not pass to a buyer. (Arkansas Assessment Coordination Division: Property Tax Relief (homestead credit, age 65 or disabled freeze, Amendment 79))

The same three households appear on every state page, so the figures can be compared across states. Each is a full-year resident taking the standard deduction, with no dependents. The figures are state income tax only: any county, city or school district income tax is described on this page but not added in. Pension income is from a private employer, and IRA figures are taxable withdrawals from traditional accounts. The state tax is our calculation from Arkansas's published 2026 rules; it is an illustration, not a return.

These households also owe federal income tax, which is the same wherever they live. The tax bracket calculator and the guide to taxes in retirement cover that side.

As a comparative measure, Tax Foundation figures drawn from Census data put Arkansas property taxes at 0.56% of owner-occupied home value in 2024, 37th among the states. Its county figures are 0.75% in Pulaski County, 0.57% in Benton County, 0.55% in Washington County, 0.48% in Garland County and 0.47% in Baxter County. Those averages already reflect the homestead credit. (Tax Foundation, Property Taxes by State and County, 2026 (comparative figures from Census ACS data))

Property is assessed at 20% of market value, and the bill is the taxable assessed value times the millage rates of the school district, county and city. Counties reappraise every three or five years. Taxes are paid a year in arrears: the bill for a 2026 assessment can be paid from the first business day of March 2027 and is delinquent, with a 10% penalty, after October 15. Tangible personal property is assessed every year as well, while household furnishings and intangible property are exempt. (Arkansas Assessment Coordination Division, Frequently Asked Questions on property tax (assessment rate, reappraisal cycle, due dates))

Every homeowner can claim the homestead property tax credit against the real property tax on a principal residence. Act 174 of the 2026 fiscal session raised it from $600 to $675 for assessment years beginning on or after January 1, 2026, which are the taxes paid in 2027. (Arkansas General Assembly, Act 174 of the 2026 Fiscal Session (homestead property tax credit raised to $675))

The credit goes to the record owner, a buyer under a recorded sales contract or the holder of a recorded life estate, and the home may be held in a revocable or irrevocable trust. Only one homestead credit may be claimed each year, and the owner applies through the county assessor. Residents of a nursing home or retirement center who still own their home can continue to qualify in some circumstances. (Arkansas Assessment Coordination Division: Property Tax Relief (homestead credit, age 65 or disabled freeze, Amendment 79))

Amendment 79 to the state constitution limits how fast taxable value can rise after a countywide reappraisal: 5% a year for a homestead and 10% a year for other real property, until the property reaches its full assessed value. For owners 65 or older or disabled the taxable value stops rising altogether once the freeze is in place. Neither limit covers new construction or improvements that add 25% or more to a property’s value, and a frozen value does not stop the bill from changing when millage rates change. (Arkansas Assessment Coordination Division: Property Tax Relief (homestead credit, age 65 or disabled freeze, Amendment 79))

The state sales and use tax is 6.5%. The Department’s rate table lists the state tax on food at 0% with an effective date of January 1, 2026. (Arkansas Department of Finance and Administration: State Sales and Use Tax Rates)

That change came from Act 1008 of 2025, which exempts food and food ingredients from the state sales and use tax from January 1, 2026. The Department’s summary notes that grocery sales remain subject to the sales and use taxes levied by cities and counties, so the tax on a cart of groceries has fallen to the local rate, not to zero. (Arkansas Department of Finance and Administration, What’s New in Sales Tax for 2025 (Act 1008: food and food ingredients))

No state-level sales tax on groceries is left. An earlier version of the bill said food would continue to be subject to the one-eighth of one percent excise tax of Amendment 75 to the state constitution; that sentence is struck through in the act as approved on April 22, 2025, and new Ark. Code 26-52-457 exempts food and food ingredients from the state gross receipts and compensating use taxes. The exemption does not cover prepared food, and candy and soft drinks are taxed at the full state rate. (Arkansas General Assembly, Act 1008 of 2025, the Grocery Tax Relief Act (Ark. Code 26-52-317, 26-52-457 and 26-53-145; effective January 1, 2026))

Local rates are where Arkansas becomes expensive. In the Department’s table for October through December 2026, Little Rock adds 2.125% in city and county tax for a total of 8.625%, Bentonville and Hot Springs add 3% for 9.5%, Fayetteville adds 3.25% for 9.75% and Mountain Home adds 3.375% for 9.875%. (Arkansas Department of Finance and Administration, List of Cities and Counties with Local Sales and Use Tax, October to December 2026)

Prescription drugs sold by pharmacists, hospitals or physicians, and oxygen prescribed by a physician, are exempt from sales tax, as are insulin and blood sugar test strips. The Department’s exemption report also shows what the grocery exemption replaced: a reduced state rate of 0.125% on food and food ingredients. (Arkansas Department of Finance and Administration, Sales Tax Exemption Statistics, fiscal year 2025 (Ark. Code 26-52-406, prescription drugs))

As a comparative figure, the Tax Foundation puts Arkansas’s average local rate at 2.96% and its combined state and average local rate at 9.46% as of January 1, 2026, the fourth highest in the country. (Tax Foundation, State and Local Sales Tax Rates, 2026 (comparative figures))

Arkansas has no estate tax in effect. Its estate tax was a pick-up tax equal to the federal credit for state death taxes, and Act 645 of 2003 provided that the estate tax chapter ceases to be operative when that federal credit is repealed completely for the estates of decedents dying on or after January 1, 2005. (Arkansas General Assembly, Act 645 of 2003 (Ark. Code 26-59-103: termination of the estate tax))

The last estate tax return the Department issued, Form AR321 for 2004, is for decedents dying after December 31, 2003 and before January 1, 2005. The same form states that Arkansas has no inheritance or gift tax, so heirs owe the state nothing on what they receive. (Arkansas Department of Finance and Administration, Form AR321: Estate Tax Return (2004))

The federal estate tax applies in every state. The estate tax calculator estimates both the federal tax and any state tax.

The 3.7% top rate for 2026 was enacted in a special session after the year had begun. Act 2, approved May 6, 2026, applies to tax years beginning on or after January 1, 2026, so it covers the whole year. The Act leaves the lower rates of 2%, 3% and 3.4% unchanged. (Arkansas General Assembly, Act 2 of the First Extraordinary Session of 2026 (Ark. Code 26-51-201(a)(4): rates for tax years beginning on or after January 1, 2026))

It follows a similar cut two years earlier. Act 1 of the Second Extraordinary Session of 2024, approved June 19, 2024, reduced the top rate from 4.4% to 3.9% for tax years beginning on or after January 1, 2024. (Arkansas General Assembly, Act 1 of the Second Extraordinary Session of 2024 (top individual rate reduced to 3.9%))

The homestead credit has risen two years running. Act 330 of 2025 raised it from $500 to $600 for assessment years beginning on or after January 1, 2025, and Act 174 of 2026 then raised it to $675 from the 2026 assessment year. (Arkansas General Assembly, Act 330 of 2025 (homestead property tax credit raised to $600))

The state sales tax on groceries ended on January 1, 2026 under Act 1008 of 2025, the Grocery Tax Relief Act. City and county sales taxes on food were left in place. (Arkansas Department of Finance and Administration, What’s New in Sales Tax for 2025 (Act 1008: food and food ingredients))

Arkansas taxes on the basis of domicile, the place a person intends as a permanent home and intends to return to. A person has only one domicile, and it does not change until they move to a new location with the intention of making it their permanent home. A full-year resident is someone who lived in Arkansas all year or maintained a domicile there during the tax year. The instructions contain no day-count test. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

A person who establishes a domicile in Arkansas or moves out during the year is a part-year resident and files Form AR1000NR. The tax is first computed as if the filer were a full-year resident on income from all sources for the entire year, with the credits subtracted, and the result is multiplied by the share of total adjusted gross income that was received while an Arkansas resident or came from Arkansas sources. A copy of the federal return must be attached. (Arkansas Department of Finance and Administration, 2025 AR1000F and AR1000NR Instructions (individual income tax booklet))

Under federal law (4 U.S.C. 114) a state cannot tax the retirement income of a person who is not its resident or domiciliary. A pension, 401(k) or IRA built up while working in another state is taxed by Arkansas, with the $6,000 exemption, once the retiree is domiciled there, and Arkansas cannot tax a pension earned in Arkansas after the retiree has moved away. (4 U.S.C. 114, Limitation on State income taxation of certain pension income)