Updated October 8, 2026. Quick answer: Generally no, up to the exemption. The 2025 Arkansas instructions say the gain on a personal residence is “exempt up to $250,000 per taxpayer” ($500,000 for married couples filing on the same return), with an ownership and use test. Gain above it is taxed on only half: Form AR1000D says “multiply line 7b by 50 percent (.50)” for a net long-term gain, and a 2026 act sets the top rate at 3.7%.
Arkansas tax on home sale profit at a glance
| Item | What the documents say |
|---|---|
| Profit on your main home | Own rule in the instructions: gain on a personal residence is exempt up to $250,000 per taxpayer ($500,000 for married couples filing on the same return) |
| Rate on gain above the exclusion | Half of net long-term gain is taxable; top rate 3.7% for 2026 (3.9% for 2025) |
| Collected at the sale | Real property transfer tax on the deed, $3.30 per $1,000 of consideration over $100; the page read does not say who pays it; no income tax withholding shown for a resident seller |
| Source | Arkansas Department of Finance and Administration; Arkansas General Assembly |
What the Arkansas documents say
The 2025 instructions for Forms AR1000F and AR1000NR state Arkansas’s own home-sale rule on the capital gain line: the gain on a personal residence is “exempt up to $250,000 per taxpayer” ($500,000 for married couples filing on the same return). The property must be owned and used as the principal residence for periods adding up to two years or more in the five years before the sale. The federal statute below states the same limits.
Gain above the exemption goes to Form AR1000D. Line 8 of that form reads “multiply line 7b by 50 percent (.50)”, so the Arkansas taxable amount of a net long-term gain is half of it. On the rate, the 2025 instructions say “Marginal Income Tax rates for 2025 are 3.9%”.
For 2026, Act 1 of the First Extraordinary Session of 2026 sets the 2026 schedule; its operative language is “For tax years beginning on or after January 1, 2026”, and the schedule tops out at 3.7%. The Department’s 2026 withholding formula still prints 3.90%, so the Act, not the formula, is the source for 3.7% on this page.
What the federal exclusion requires
Most state answers start here. The statute says “Gross income shall not include gain from the sale or exchange” of property that, during the five years before the sale, you owned and used as your principal residence for periods adding up to two years or more. The limit is “shall not exceed $250,000”, or $500,000 for a husband and wife who make a joint return and meet the statute’s conditions. See CMG’s home sale taxes page and exclusion calculator.
A worked example at a $400,000 gain
An illustration, not a return: a married couple in Arkansas sells their main home with a gain of $400,000 and meets the ownership and use tests. The gain is below the $500,000 joint exemption the instructions print, so on the documents read $0 is taxed by Arkansas. As a second illustration, computed below, suppose the gain were $600,000. The amount above the exemption would then be $100,000; if all of it were net long-term gain, half of it, $50,000, would be the Arkansas taxable amount and, at the top rate of 3.7%, the tax would be $1,850, before any other adjustment and assuming the rest of the return already reaches the top bracket.
What is collected at the sale
The Department prints a real property transfer tax of “$3.30 per $1,000 of actual consideration on transactions that exceed $100”. The page read does not say who pays it and prints no principal-residence exemption. The documents read show no Arkansas income tax withholding on a resident’s sale.
What changes in 2026
Arkansas: Act 1 of the First Extraordinary Session of 2026 cuts the top individual rate to 3.7% for tax years beginning on or after January 1, 2026, down from 3.9% for 2025.
What the documents do not say
- The Arkansas statute was not archived; the exemption wording is the instructions’. Whether the half-taxable rule applies to a particular gain above the exemption depends on the holding period and the Form AR1000D lines, which this page does not walk through. The transfer tax page does not say who pays it. The instructions are for tax year 2025; the 2026 rate comes from the Act.
Common mistakes
- Taxing the whole gain above the exemption; Form AR1000D taxes half of a net long-term gain.
- Using the 3.9% rate printed in the 2025 instructions, or in the Department’s 2026 withholding formula, for a 2026 sale; the 2026 act sets 3.7%.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the sale.
Related: home sale taxes, state tax on home sale profit, how Arkansas taxes capital gains, Arkansas retirement taxes, and home sale exclusion calculator.
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Answer againSources
- 2025 Arkansas Individual Income Tax Instructions (AR1000F and AR1000NR): https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR1000F_and_AR1000NR_Instructions.pdf
- 2025 Form AR1000D, Arkansas Individual Income Tax Capital Gains: https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR1000D_CapitalGains.pdf
- Real Property Transfer Tax: https://www.dfa.arkansas.gov/office/taxes/excise-tax-administration/miscellaneous-tax/arkansas-miscellaneous-tax-laws/real-property-transfer/
- Act 1 of the First Extraordinary Session, 2026 (House Bill 1001), An Act to Reduce Income Taxes: https://arkleg.state.ar.us/Acts/FTPDocument?path=%2FACTS%2F2026S1%2FPublic%2F&file=1.pdf&ddBienniumSession=2025%2F2026S1
- State of Arkansas Withholding Tax Formula Method, Tax Year 2026 (effective 01/01/2026): https://www.dfa.arkansas.gov/wp-content/uploads/whformula_2026.pdf
- 26 U.S.C. 121, Exclusion of gain from sale of principal residence (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title26/html/USCODE-2023-title26-subtitleA-chap1-subchapB-partIII-sec121.htm
Sources: the primary documents linked above, read on October 8, 2026. General information, not tax advice. Your own facts decide the outcome, and a tax professional or the state agency itself is the right place to confirm anything consequential.