Does Arkansas Tax Retirement Income? Exemptions and 65+ Credits

Arkansas does tax retirement income, but with generous carve-outs: Social Security, Railroad Retirement, and military pensions are fully exempt, and the first $6,000 per person of other retirement income (pensions, 401(k)s, traditional IRAs) is also exempt. Anything above that is taxed at Arkansas’s regular income tax rates, which top out at 3.9%.¹

Retirement Income Arkansas Doesn’t Tax at All

Three categories are fully excluded from Arkansas taxable income, regardless of amount.

Social Security. Every dollar of Social Security is excluded from your state return. The federal government may tax up to 85% of your benefits depending on combined income, but Arkansas ignores Social Security completely.²

Railroad Retirement. All tiers are exempt, including Tier I, Tier II, vested dual benefits, and supplemental annuity payments reported on RRB-1099 and RRB-1099-R. A private pension from a railroad company is not a Railroad Retirement benefit and falls under the general retirement rules below.³

Military retirement pay. There is no dollar cap. A $40,000-a-year military pension produces zero Arkansas taxable income. Survivor benefits funded by a service member’s retired pay are also fully exempt. The statute defines “uniformed services” broadly, covering the Army, Navy, Air Force, Marine Corps, Coast Guard, their reserve components, the National Guard, the Public Health Service Commissioned Corps, and the NOAA Commissioned Officer Corps.¹

The $6,000 Exemption on Pensions, 401(k)s, and IRAs

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

If both spouses draw qualifying retirement income, each gets a separate $6,000 exemption, so a couple can shelter up to $12,000. Everything above the exemption is taxed at Arkansas’s regular rates.

For traditional IRAs specifically, you must be at least 59½ to claim 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, even when they avoid the federal 10% early withdrawal penalty.¹

Qualified Roth IRA distributions are exempt entirely. To qualify, the account must have been open at least five years and you must be 59½ or older. Converting a traditional IRA to a Roth, however, creates taxable income in the year of conversion at the state level just as it does federally.⁴

Arkansas Tax Rates on Retirement Income Above the Exemption

Anything left after the exemptions is taxed at the same graduated rates that apply to wages and other income. Arkansas cut its top individual rate from 4.4% to 3.9%, and that rate applies for 2026.⁵ The brackets look roughly like this:

0% on taxable income up to about $5,499
2% from about $5,500 to $10,899
3% from about $10,900 to $15,599
3.4% from about $15,600 to $25,699
3.9% above roughly $25,700

These brackets apply after subtracting the standard deduction ($2,470 single, $4,940 married filing jointly for 2025) and any exemptions. Because Social Security, military pay, and the $6,000 general exemption come off before rates apply, many retirees end up with an effective state rate well below the top bracket.⁶

Extra Credits Once You Turn 65

Arkansas gives residents 65 and older a small income tax credit under Arkansas Code 26-51-501. The base statutory amount is $20 per qualifying taxpayer, and if both spouses are 65 or older, each gets the credit.⁷

The homestead property tax credit is more meaningful. Beginning with 2026 tax bills, the maximum credit rises to $600, up from $500. It applies to your primary residence, you apply through your county assessor, and only one homestead credit is allowed per taxpayer per year.⁸

A Trap for Military Retirees With Other Pensions

The military exemption and the $6,000 general retirement exemption are mutually exclusive. If you receive both military retired pay and a civilian pension or IRA distributions, you have to pick one: exempt all your military pay under the unlimited provision, or take the $6,000 exemption across all retirement income. For nearly every military retiree the unlimited military exemption wins by a wide margin, but the civilian pension income is then fully taxable at Arkansas rates with no $6,000 shelter.¹

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
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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