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

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