Arkansas Itemized Deductions: Rules, Limits, and Records

Arkansas itemized deductions let you subtract specific expenses from your state taxable income when they add up to more than the state’s standard deduction. For 2025, that standard deduction is $2,470 per taxpayer, or $4,940 for married couples filing jointly. Those amounts are low enough that many homeowners, people with significant medical bills, and regular donors come out ahead by itemizing on Form AR3.

When Itemizing Beats the Standard Deduction

Itemize whenever your qualifying expenses exceed the standard deduction for your filing status. This is a separate decision from your federal return. Arkansas does not require you to make the same choice at the state level, so you can take the federal standard deduction and still itemize in Arkansas, or the reverse.

You report the deductions on Form AR3, attached to Form AR1000F or AR1000NR. The form organizes expenses into medical and dental, taxes, interest, contributions, casualty and theft losses, post-secondary education tuition, and miscellaneous deductions.

How Arkansas Rules Differ From Federal

Arkansas does not automatically adopt every change Congress makes to the Internal Revenue Code. The state conforms to specific IRC sections as of fixed dates, and those dates vary by provision. For business expenses and charitable contributions, Arkansas conforms to 26 U.S.C. §§ 162 and 170 as in effect on January 1, 2019.¹ Three practical differences matter most:

Miscellaneous itemized deductions survive in Arkansas. The federal Tax Cuts and Jobs Act suspended these expenses through 2025, and the One Big Beautiful Bill extended the suspension. Arkansas never adopted that change, so unreimbursed employee expenses and similar costs remain deductible on your state return.
The medical expense floor is higher. Arkansas uses a 10% AGI threshold, compared to 7.5% federally.²
Casualty losses are broader. Federal law limits personal casualty losses to federally declared disasters. Arkansas has no such restriction.³

Medical and Dental Expenses

You can deduct unreimbursed medical and dental expenses that exceed 10% of your adjusted gross income. Only the amount above that floor counts. On an AGI of $50,000 with $8,000 in qualifying medical costs, you subtract $5,000 and deduct the remaining $3,000.²

Qualifying expenses include payments to doctors, dentists, and surgeons, prescription medications, health insurance premiums paid with after-tax dollars, and long-term care insurance premiums. Costs covered by an employer or insurer do not count. Because the floor is 10%, routine medical spending rarely clears it. The deduction is most useful in a year with surgery, extended treatment, or significant dental work.

Mortgage and Other Interest

Arkansas allows a deduction for mortgage interest paid on a primary or second home, deductible points paid at closing, and investment interest. The state generally follows federal limits through its IRC conformity, so the deduction is capped at the interest on the first $750,000 of acquisition debt ($375,000 if married filing separately). The One Big Beautiful Bill made that cap permanent.⁴

Home equity interest is deductible only if the borrowed funds were used to buy, build, or substantially improve the home securing the loan. If you paid mortgage interest to an individual rather than a financial institution, you can still deduct it, but you must list the lender’s name and address on Form AR3.²

Property and Other Taxes

Form AR3 lets you deduct real estate taxes and personal property taxes paid during the year. You list what you actually paid. Arkansas imposes no state-level cap on this deduction.

Federal law is different. The federal SALT deduction is capped at $40,400 for 2026, with a phase-down beginning when modified AGI exceeds $500,500 that can reduce the cap to as low as $10,000. That federal cap does not limit what you claim in Arkansas, but it affects any coordinated planning between the two returns.

Charitable Contributions

Arkansas adopts the federal charitable contribution rules under 26 U.S.C. § 170 as in effect on January 1, 2019.¹ Cash donations to qualifying charities are generally deductible up to 60% of AGI. Donations of appreciated property such as stocks or real estate are typically capped at 30% of AGI. Contributions above the annual limit carry forward for up to five years and go on the carryover line of Form AR3.

The recipient must be a qualified organization under 26 U.S.C. § 501(c)(3) or another IRS-recognized section. For any cash contribution, keep a bank statement or receipt. Cash gifts of $250 or more require a written acknowledgment from the charity, which you must have in hand by the time you file.⁵

Casualty and Theft Losses

Arkansas is more generous than the federal government here. Federal law allows personal casualty losses only from federally declared disasters.³ The state applies no such requirement. Losses from fire, storm, shipwreck, other casualty, or theft are deductible in Arkansas as long as insurance did not cover them.

Two floors apply. Each individual loss must exceed $100 before any portion counts. Then your total qualifying losses for the year must exceed 10% of your net income, with only the excess deductible.⁶ Report the loss on Form AR4684 and attach it to Form AR3.

Artistic, Literary, and Musical Donations

Arkansas has its own deduction for creators who donate their own work. If you are an artist, writer, or musician, you can deduct the fair market value of what you donate, but only if you meet all four requirements:

At least 50% of your income for the current or prior tax year comes from your art-related profession.
An independent appraiser approved by the Department of Finance and Administration verifies the fair market value, and you attach a copy of the appraisal to your return.
The work is donated to and accepted by a museum, art gallery, or 501(c)(3) nonprofit located in Arkansas.
The deduction cannot exceed 15% of your gross income for the year of donation.

This deduction is separate from the general charitable contribution deduction and has its own line on Form AR3.⁷ The income test and the in-state recipient rule make it a niche provision, but a valuable one for working artists who donate to Arkansas institutions.

Miscellaneous Deductions Still Allowed in Arkansas

Arkansas still allows the miscellaneous itemized deductions that federal law has suspended. These are expenses that fall outside the specific categories above, and you can deduct them only to the extent they exceed 2% of your AGI.⁸

The most common item here is unreimbursed employee business expenses, reported on Form AR2106 and carried to Form AR3. Others include tax preparation fees, investment advisory fees, and safe deposit box rental when used to store taxable securities. The statute excludes business expenses, medical costs, interest, taxes, losses, charitable contributions, and artistic donations from this category, since each has its own rules.⁸ Because these deductions vanished from the federal return, many filers forget they still work in Arkansas. If you had significant unreimbursed work costs, check this line.

Miscellaneous Deductions Without the 2% Floor

Form AR3 has a separate section for miscellaneous deductions that do not face the 2% AGI threshold. The two most notable items are volunteer firefighter expenses and post-secondary education tuition.² Report qualifying college or university tuition on Form AR1075 and carry the amount to Form AR3. These reduce taxable income dollar for dollar, with no percentage floor.

Records to Keep

Documentation is what separates a defensible deduction from an audit problem. Keep records at least three years from the date you filed or two years from the date you paid the tax, whichever is later. For a claim based on worthless securities, keep records for seven years.⁹

What counts as adequate documentation depends on the deduction:

Medical expenses: explanation of benefits statements, pharmacy receipts, and insurance premium invoices showing what you paid out of pocket.
Interest: Form 1098 from your mortgage lender, or the lender’s name and address if you pay an individual.
Charitable contributions: written acknowledgment from the charity for gifts of $250 or more, plus bank statements or receipts for any cash gift.⁵
Casualty losses: photos of damage, insurance correspondence, repair estimates, and police reports for theft.
Employee expenses: receipts, mileage logs, and evidence that your employer did not reimburse you.

Penalties for Overreaching

Claiming deductions you are not entitled to, or inflating amounts, can trigger penalties at both levels. The IRS imposes a 20% accuracy-related penalty on any underpayment resulting from negligence or a substantial understatement of income tax.¹⁰ Intentional fraud carries steeper consequences under a separate provision. Arkansas can assess its own penalties and interest on underpayments tied to improper deductions on your state return. Claim only what you paid, keep the receipts, and leave off any figure you cannot document.

1
Justia. Arkansas Code 26-51-419 (2024) – Deductions
2
Arkansas Department of Finance and Administration (DFA). 2024 AR3 Itemized Deductions
3
Internal Revenue Service. Publication 547 (2025), Casualties, Disasters, and Thefts
4
Internal Revenue Service. Publication 936 (2025), Home Mortgage Interest Deduction
5
Internal Revenue Service. Charitable Organizations: Substantiation and Disclosure Requirements
6
Cornell Law School. 1.26 Ark. Code R. 51-424(a)(1) – Losses
7
Justia. Arkansas Code 26-51-422 (2024) – Deductions – Fair Market Value of Donated Artistic, Literary, and Musical Creations
8
Justia. Arkansas Code 26-51-437 – Deductions – Miscellaneous Itemized Deductions
9
Internal Revenue Service. How Long Should I Keep Records
10
Office of the Law Revision Counsel. 26 U.S. Code 6662 – Imposition of Accuracy-Related Penalty on Underpayments