Updated October 5, 2026. Quick answer: Yes, with a $6,000 exclusion for plan income. Arkansas’s Department of Finance and Administration says “you are eligible for a $6,000 retirement income exclusion.” The top rate is 3.9% for 2025, and a 2026 act sets it at 3.7%.
More state retirement-income schedules, line by line: Arkansas AR1000F retirement exemptions.
How Arkansas treats annuity income
| Item | What the documents say |
|---|---|
| Treatment | Taxed; the first $6,000 of employer-plan retirement income, and of traditional IRA distributions after 59 1/2, is exempt |
| 2025 top rate | “Marginal Income Tax rates for 2025 are 3.9%” |
| The cap | “Total exemptions from all plans described under 12 and 13” are capped at $6,000 per taxpayer, and a spouse gets a separate exclusion |
| Purchased annuities | For “a private annuity contract for which you paid the premiums” the instructions allow cost recovery under IRC section 72 and do not extend the $6,000 exclusion to it |
| Early distributions | Generally do not qualify for the exclusion |
A $24,000 example
A retiree with $24,000 a year from an employer plan can exclude $6,000, leaving $18,000. At the 3.9% top rate that is at most $702 for 2025, computed as ($24,000 minus $6,000) x 3.9%; lower brackets make the actual figure smaller.
Under the 3.7% top rate for 2026 the same ceiling is $666, computed as ($24,000 minus $6,000) x 3.7%.
A $24,000 payout from a contract bought with your own premiums gets cost recovery only, so the $6,000 exclusion is not the tool there.
What changes in 2026
Act 2 of the First Extraordinary Session of 2026 (Senate Bill 1) sets the top rate at 3.7% for tax years beginning on or after January 1, 2026, from a net income of $26,400 and above in the bill as passed. The $6,000 exclusion is not changed in the text read.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal side in Topic no. 410, Pensions and Annuities and Publication 575, Pension and Annuity Income.
Related: whether Arkansas taxes pensions, how Arkansas taxes retirement income, state tax on 401(k) and IRA withdrawals, how a surrendered annuity is taxed, and pension and annuity decisions.
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Answer againSources
- 2025 Arkansas Individual Income Tax Instructions, AR1000F (Arkansas DFA): https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR1000F_and_AR1000NR_Instructions.pdf
- Act 2 of the First Extraordinary Session of 2026, SB 1 (Arkansas General Assembly): https://www.arkleg.state.ar.us/Home/FTPDocument?path=/ACTS/2026S1/Public/ACT2.pdf
- Subject 206, Pensions and Annuities (Arkansas DFA): https://www.dfa.arkansas.gov/wp-content/uploads/206-PensionsAnnuities.pdf
Sources: the primary documents linked above, read on October 5, 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.