Arkansas Exempt Income
Under Arkansas state tax law, certain types of income are not subject to state income tax. These exemptions help reduce the tax burden for individuals receiving specific forms of income. Below is a list of income types that are exempt from Arkansas state taxation.
Types of Exempt Income in Arkansas
- Child support payments – These are not taxable by the State of Arkansas.
- Welfare benefits – Payments received through public assistance programs are exempt.
- Life insurance proceeds – Lump sum payments received due to the death of an individual are not taxable.
- Tax-exempt interest – Interest income that is already exempt from federal taxation is also exempt at the state level.
- Accident and health insurance proceeds – Payments received from accident or health insurance policies are not taxable.
- Gifts and inheritances – These are not considered taxable income in Arkansas.
- Cash rebates – Rebates received on the purchase of cars or other items are exempt from state income tax.
Important Notes
While these forms of income are exempt, taxpayers must still file an Arkansas state tax return and report all income from all sources. The exemption is claimed as an adjustment on Form AR1000ADJ. For example, if you receive exempt income such as interest or dividends, you may still need to report it on your return to claim the exemption.
Additionally, if you claim an exemption for military income, military retirement, or employer-sponsored pension/qualified IRA distributions, you are not eligible to use the Low-Income Tax Tables. You must use the Regular Income Tax Table instead.
Source:
FAQs - Arkansas Department of Finance and Administration
Form AR1000ADJ Instructions
Arkansas Tax Tables
Disclaimer: Always verify information with official Federal or State Department of Revenue Forms and Instructions before filing your tax return.