Is military retirement taxed in Arkansas?

How it works in Arkansas

The AR1000F lists income on its own lines rather than starting from federal AGI. Put the gross military retired pay from your 1099-R on line 17, Military retirement, in the Primary box, and a spouse's pay in the Spouse box. The 2025 instructions say to do that regardless of filing status and to attach the 1099-R. Keep the same pay off lines 18A and 18B, which are for employer pensions and qualified IRA distributions.

Who counts is spelled out in § 26-51-307(e)(2): a retired member of the Army, Marine Corps, Navy, Air Force, Space Force or Coast Guard, a reserve component of those services, the National Guard of any state, the commissioned corps of the Public Health Service, or the NOAA Commissioned Officer Corps. Act 508 of 2025 inserted the Space Force. A Coast Guard civilian pension, a Merchant Marine pension or a state defense force pension is not on that list.

The $6,000 trade-off comes from subsection (f). Anyone claiming the military exemption loses the general $6,000 exemption for employer pensions and for IRA distributions after age 59 and a half. Act 358 of 2023 softened that from tax year 2023: when the military or survivor exemption is under $6,000, you may exempt other retirement income up to the difference. With assumed figures, a $4,200 SBP annuity and a $10,000 IRA withdrawal at 62 leave $1,800 of the IRA exempt and $8,200 taxable. A retiree with a $28,800 pension gets no general exemption at all.

On that assumed $28,800 pension, the military exemption is worth up to about $1,066 for 2026 at the 3.7% top rate, or about $1,123 for 2025 at 3.9%. Act 1 of the 2026 First Extraordinary Session, approved May 6, 2026, made 3.7% the top rate for tax years beginning on or after January 1, 2026; in its table for net income up to $94,700, that rate starts at $26,400. DFA's 2026 withholding formula, updated after the Act, uses the same brackets. Its 2026 AR1000ES estimated tax voucher, revised October 13, 2025, still prints a 3.9% rate schedule, so the 3.7% figure rests on the Act and the withholding formula.

Years before 2018 do not qualify, and later years close on a rolling basis. DFA accepts an amended return within three years of filing or two years of payment, whichever is later, so a 2023 return filed in April 2024 stays open until April 2027. Check the amended box on that year's AR1000F, replace the incorrect entries, and attach an explanation of the change.

What trips Arkansas retirees up

• The 2025 instructions count military retirement in gross income even though it is exempt from tax. Their definition says the $6,000 retirement exemption, active-duty pay and military retirement are included in gross income, so check the filing requirement with the pension counted before deciding you have no return to file.
• The $29 credit marked 65 Special goes to a taxpayer 65 or older who claims no retirement income exemption on line 18. The instructions do not mention line 17, the military line.
• Act 238 of 2009 extends the refund deadline when the Secretary of Veterans Affairs retroactively decides that uniformed service retirement pay was for a service-connected disability. That matters mostly for tax years before 2018, when Arkansas still taxed retired pay above the general exemption.