Does Arkansas Tax Retirement Income? Exemptions and Age 65 Breaks

Arkansas does tax retirement income, but lightly. Social Security benefits, Railroad Retirement, and military retirement pay are fully exempt from Arkansas state income tax. Other retirement income — pensions, 401(k)s, 403(b)s, and traditional IRAs — qualifies for a $6,000 per-person exemption, and anything above that is taxed at the regular Arkansas rates, which top out at 3.9%.¹

Social Security and Railroad Retirement Are Fully Exempt

Arkansas excludes all Social Security payments from state taxable income, regardless of how much you earn from other sources or how you file. The federal government may still tax up to 85% of your benefits depending on combined income, but your Arkansas return ignores Social Security entirely.²

Railroad Retirement benefits get the same treatment at every tier, including Tier I, Tier II, vested dual benefits, and supplemental annuity payments reported on RRB-1099 and RRB-1099-R forms. One line to watch: a private pension from a railroad employer is not a Railroad Retirement benefit. Those private pensions fall under the general $6,000 retirement rule below.³

Military Retirement Pay Is Fully Exempt

Arkansas fully exempts retirement pay received by members of the uniformed services, with no dollar cap. Survivor benefits funded by a service member’s retired pay are also fully exempt. The statutory definition of uniformed services covers all branches of the armed forces, their reserve components, the National Guard of any state, the Public Health Service Commissioned Corps, and the NOAA Commissioned Officer Corps.¹

There is a trade-off. If you claim the full military exemption, you cannot also claim the $6,000 general retirement exemption on other income like a private pension. For almost every military retiree the unlimited military exemption is still the better choice, but any non-military retirement income you draw will then be fully taxable at Arkansas rates.¹

Pensions, 401(k)s, and Traditional IRAs

Non-military retirement income gets a $6,000 exemption per person, per year. The exemption covers distributions from employer pensions (public or private), 401(k) and 403(b) plans, and traditional IRAs. It is a combined cap across all those sources, not $6,000 per account.¹

For IRA distributions, you must be at least 59½ to use the exemption. The only exceptions are distributions triggered by death or disability. Early withdrawals for medical expenses, education, or a first-time home purchase don’t qualify at the state level, even if they avoid the federal 10% penalty.¹

Married couples each get their own $6,000, so a couple with qualifying retirement income can shelter up to $12,000 combined. Anything above the exemption is taxed at your regular Arkansas rate.

Roth IRAs

Qualified Roth IRA distributions are completely exempt from Arkansas tax. The account must have been open at least five years and you must be 59½ or older. A Roth conversion, however, creates taxable income in the year of the conversion, just as it does on your federal return.⁴

What Rate Applies to the Taxable Portion

Retirement income above the exemptions is taxed at the same graduated rates as any other Arkansas income. The top rate was cut from 4.4% to 3.9% and that top rate applies for 2026.⁵ The lower brackets start at 0% and step up through 2%, 3%, and 3.4% before reaching 3.9% on taxable income above roughly $25,700.

Those rates apply after subtracting the standard deduction ($2,470 for single filers, $4,940 for married filing jointly for 2025) and your exemptions. Because Social Security, military pay, and the $6,000 retirement exemption come off the top, many retirees land well below the top bracket in effective terms.⁶

Extra Breaks at Age 65

Arkansas offers a small tax credit for residents 65 or older under Arkansas Code 26-51-501. The base statutory amount is $20 per qualifying taxpayer, and both spouses can claim it if both are 65 or older.⁷

The homestead property tax credit on your primary residence rises to a maximum of $600 for 2026 tax bills, up from $500. You apply through your county assessor, and only one homestead credit is allowed per taxpayer per year.⁸

One Filing Trap to Avoid

The common mistake is claiming both the full military exemption and the $6,000 general retirement exemption on the same return. The statute treats them as mutually exclusive. If you draw both military retirement pay and a private pension, you have to pick: exempt all the military pay with no cap, or take the $6,000 exemption against your combined retirement income. The military route wins almost every time, but it leaves the private pension fully taxable in Arkansas.¹

Full-year residents report all of this on Form AR1000F; part-year residents and nonresidents use AR1000NR. The exempt amounts are entered as subtractions from federal adjusted gross income on the appropriate lines.⁶

1
Justia. Arkansas Code 26-51-307 – Retirement or Disability Benefits
2
Justia. Arkansas Code 26-51-404 – Gross Income Generally
3
Arkansas Department of Finance and Administration. Nontaxable Income – Subject 209
4
Arkansas Department of Finance and Administration. Traditional Individual Retirement Accounts – Subject 300
5
Arkansas Department of Finance and Administration. Income Tax Withholding Tables Adjusted Due to Most Recent Tax Cut
6
Arkansas Department of Finance and Administration. Arkansas Individual Income Tax Forms and Instructions
7
FindLaw. Arkansas Code 26-51-501 – Tax Credits
8
Arkansas Department of Finance and Administration. Property Tax Relief