If you’re retired or planning retirement in Arkansas, understanding how the state taxes retirement income is important for managing withdrawals and minimizing state tax.
Arkansas taxes most retirement income, but it provides exclusions that can reduce how much is taxable.
You can feel reassured knowing Arkansas exempts Social Security and offers a retirement income exclusion that benefits many retirees.
Arkansas Income Tax Overview
Arkansas uses a progressive income tax system.
That means:
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• Income is taxed in layers
• Higher portions of income are taxed at higher rates
• Retirement income is generally included in taxable income unless specifically excluded
The brackets apply to wages, pensions, IRA withdrawals, and 401(k) distributions once taxable income is calculated.
2026 Arkansas Income Tax Brackets
Here are the 2026 Arkansas individual income tax brackets (the structure most taxpayers use when calculating state tax):
2026 Arkansas Income Tax Brackets (All Filing Statuses)
| Tax Rate | Taxable Income |
|---|---|
| 0% | $0 to $5,500 |
| 2.0% | $5,500.01 to $10,900 |
| 3.0% | $10,900.01 to $15,600 |
| 3.4% | $15,600.01 to $25,700 |
| 3.9% | $25,700.01 and above |
These brackets reflect the graduated rate structure Arkansas uses in 2026, with the top marginal rate at 3.9% on taxable income above $25,700 for most taxpayers. The exact tax depends on filing status and taxable income after deductions.
Social Security Benefits
Arkansas does not tax Social Security benefits.
This means:
• Social Security retirement benefits are fully exempt
• Social Security disability benefits are fully exempt
Even if a portion is taxable federally, Arkansas excludes Social Security from state taxable income.
Example:
If you receive $32,000 in Social Security benefits, none of that amount is taxed by Arkansas.
Pension Income in Arkansas
Arkansas taxes pension income but allows a retirement income exclusion.
Taxpayers may exclude up to $6,000 per person of qualified retirement income each year.
Qualified retirement income may include:
• Private employer pensions
• Government pensions
• Military retirement pay
If your total pension income is under $6,000, it may be fully exempt.
If it exceeds $6,000, the remaining amount is taxable.
IRA Withdrawals
Traditional IRA withdrawals are generally taxable in Arkansas because they are included in federal taxable income.
However, IRA distributions count toward the $6,000 retirement income exclusion.
This includes:
• Regular withdrawals
• Required Minimum Distributions
• Early withdrawals
Roth IRA qualified distributions are generally not taxable because they are not included in federal taxable income.
401(k) and 403(b) Withdrawals
Distributions from 401(k) and 403(b) plans are generally taxable in Arkansas if taxable federally.
However, they also qualify for the $6,000 retirement income exclusion.
Roth 401(k) qualified distributions are generally not taxable at the state level if not taxable federally.
Military Retirement Income
Military retirement pay qualifies for the $6,000 exclusion.
Certain military disability benefits are not taxable because they are not included in federal taxable income.
What Happens Above the Exclusion?
If your total qualifying retirement income exceeds $6,000 per person:
• The first $6,000 is excluded
• The remaining amount is taxed under Arkansas’ progressive brackets
Because Arkansas uses multiple brackets, only the portion within each bracket is taxed at that rate.
Planning Considerations
• Social Security is fully exempt
• Up to $6,000 per person of retirement income is excluded
• Income above the exclusion is taxed under progressive rates
• Coordinating withdrawals can reduce taxable income
• Roth withdrawals may help limit state taxation
Managing total retirement income can help keep more income in lower brackets.
💻 Electronic Filing Recommendation
E-filing your Arkansas return is recommended:
• Automatic retirement income exclusion calculation
• Proper application of progressive brackets
• Reduced math errors
• Faster processing
Tax software ensures the $6,000 exclusion is applied correctly once income is entered.
Final Thoughts
Arkansas taxes pensions, IRA withdrawals, and 401(k) distributions under a progressive income tax system, but allows up to $6,000 per person of qualified retirement income to be excluded.
Social Security benefits are fully exempt. With careful planning, retirees can reduce or limit their Arkansas state income tax liability.
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| Take advantage of this offer and save 10% on TurboTax Electronic Tax Filing! |
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