Updated October 4, 2026. Quick answer: Yes, with a $6,000 exemption. Arkansas taxes 401(k) and IRA withdrawals, but the 2025 booklet says “You are entitled to a $6,000 exemption from the taxable amount” of employer-sponsored plan income and of traditional IRA distributions taken after age 59 and a half. The booklet adds that the exemption “cannot exceed $6,000 per taxpayer, not including recovery of cost”.
More state retirement-income schedules, line by line: Arkansas AR1000F retirement exemptions.
Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Arkansas tax on inherited IRA withdrawals.
Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Arkansas tax 403(b) and 457(b) withdrawals.
Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: Arkansas tax withholding on IRA and 401(k) withdrawals.
Taking money out of your TSP? How the state taxes it, from its own tax documents: Does Arkansas tax TSP withdrawals?.
What Arkansas does with 401(k) and IRA withdrawals
The booklet’s test for the plan exemption is that the “distribution was from public or private employment-related retirement systems”. It limits early distributions: “All other premature distributions or early withdrawals” do not qualify. For military retirees it says “Retirees cannot claim the $6,000 exemption for traditional or employer sponsored” distributions when their military exemption is larger. The booklet does not address Roth IRA or Roth 401(k) distributions.
| Item | What the documents say |
|---|---|
| Treatment | Taxable, with a $6,000 exemption per taxpayer |
| Exemption limit | $6,000 per taxpayer in total across employer-sponsored plans and traditional IRAs |
| Early IRA withdrawals | Do not qualify, except on account of death or disability |
| State rate | 3.9% top rate for 2025; 3.7% top rate for 2026 |
| Source | Arkansas DFA 2025 AR1000F instructions; Act 2 of the First Extraordinary Session of 2026 |
A $40,000 withdrawal
For a taxpayer who qualifies, $6,000 of a $40,000 withdrawal is exempt and $34,000 (computed as $40,000 minus $6,000) stays in Arkansas income. The tax on that amount depends on your other income and on the rate brackets.
What changes in 2026
For tax years beginning on or after January 1, 2026 the top rate is 3.7%, under Act 2 of the First Extraordinary Session of 2026. The documents print no change to the $6,000 exemption.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on these withdrawals in Publication 590-B, Distributions from Individual Retirement Arrangements and Publication 575, Pension and Annuity Income.
Related: whether Arkansas taxes pensions, how Arkansas taxes retirement income, whether Arkansas taxes Roth conversions, and the state-by-state table of 401(k) and IRA withdrawal tax.
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Answer againSources
- 2025 Arkansas Individual Income Tax Forms and Instructions (AR1000F and AR1000NR): https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR1000F_and_AR1000NR_Instructions.pdf
- State of Arkansas Indexed Tax Brackets, Tax Year 2025: https://www.dfa.arkansas.gov/wp-content/uploads/2025_TaxBrackets.pdf
- Act 2 of the First Extraordinary Session of 2026 (SB1), reducing individual income tax rates (amends Ark. Code 26-51-201): view the document
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.