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April 6, 2025
Question

I'm retired. Why do I have to pay state income tax?

  • April 6, 2025
  • 1 reply
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I live in Arkansas

1 reply

April 6, 2025

In retirement, certain types of income can still be subject to state income tax. Outside of Social Security benefits, military pensions, and the $6,000 exemption, most income earned in retirement is subject to Arkansas state tax.

 

Here's a breakdown of how Arkansas handles taxes for retirees:

  • The types of retirement income deemed exempt from taxation in Arkansas include:
    • Retired military personnel are entitled to a $6,000 exemption; • All military disability income;  
    • First $6,000 received from a qualified employer-sponsored public or private retirement or disability plan. 
      • The $6,000 is in addition to whatever cost of contribution the retiree is eligible to recover for the tax year; 
    •  Social Security benefits, VA benefits, Workers’ Compensation, Railroad Retirement benefits (Tier I and Tier II), and unemployment compensation. 
    • If an IRA distribution was received after reaching the age of fifty-nine and one-half (59 ½), the first $6,000 is exempt from tax;
    • If income was received from military retirement, an adjustment may be computed if the payment includes Survivor’s Benefit