Updated October 7, 2026. Quick answer: Mostly yes, after a small exemption. The AR1000F instructions name “thrift savings plans” among the plans whose early withdrawals are reported on line 16, and allow “the $6,000 exemption for retirement or disability benefits” for distributions from employment-related retirement systems; the rest of a TSP withdrawal is taxable. The 2025 rate is printed as 3.9%.
Arkansas TSP withdrawal tax treatment at a glance
| Item | What the documents say |
|---|---|
| TSP withdrawals | Taxed after the first $6,000 of employment-related retirement plan distributions, which is exempt; the instructions name thrift savings plans only on line 16 |
| FERS annuity | UNVERIFIED: the instructions read do not mention FERS or federal civil service annuities; they exempt military retirement separately |
| Rate or limit printed | First $6,000 exempt per taxpayer; Marginal Income Tax rates for 2025 are 3.9% |
| Where it is reported | Form AR1000F: line 16 (distributions), lines 18A and 18B (employment-related retirement plans) |
| Source | Arkansas Department of Finance and Administration |
What the Arkansas documents say
The instructions for line 16 cover taxable lump-sum distributions, annuities and traditional IRA distributions. They define premature distributions as amounts withdrawn from a traditional IRA, deferred compensation or “thrift savings plans” before age 59 1/2 or disability, and add that rollovers are tax exempt when documented with the 1099-R.
For retirees the relevant lines are 18A and 18B. The instructions say “You might be eligible for the $6,000 exemption” when the distribution was from public or private employment-related retirement systems, plans or programs; the recipient does not have to be retired, the method of funding is irrelevant, and the exemption may be taken from lump-sum or installment payments. Any balance above it is taxable and goes on the line.
The instructions give the rate: “Marginal Income Tax rates for 2025 are 3.9%”, as amended in 2024. The statute the instructions cite for the exemption is “A.C.A 26-51-307(f)”.
A worked example at $30,000 of withdrawals
An illustration, not a return: an Arkansas resident takes $30,000 from the TSP in 2026. If the exemption applies in full, $24,000 of it stays in Arkansas taxable income. The instructions print a marginal rate rather than a flat one on that amount, so this page computes no tax figure. A withdrawal before age 59 1/2 may also carry the federal early withdrawal penalty.
If you moved to Arkansas or left it
The rules above are Arkansas’s own, for a resident. Federal law limits what a state you have left may do: “No State may impose an income tax on any retirement income” of someone who is not a resident or domiciliary of that state, as 4 U.S.C. 114(a) puts it. The statute defines retirement income by reference to plans described in the Internal Revenue Code; this page does not decide whether a particular TSP payment meets that definition. If you moved during the year, check each state’s page and return. See CMG’s TSP withdrawal options and FERS, TSP and Social Security sequencing pages for the federal side.
What changes in 2026
The documents read for Arkansas announce no change for 2026 that is specific to TSP withdrawals. The instructions read are for tax year 2025, the newest archived; check the state agency for the 2026 forms when they are published.
What the documents do not say
- The instructions name thrift savings plans only in the line 16 premature-distribution sentence; the line 18 exemption refers to employment-related retirement plans without naming the TSP, so applying it to a TSP withdrawal is the line’s general wording. The instructions do not mention FERS. They are for tax year 2025; check the agency for the 2026 forms and rate.
Common mistakes
- Treating the whole TSP withdrawal as exempt; the instructions exempt the first $6,000, not the whole amount.
- Claiming the $6,000 twice: the instructions also apply it to traditional IRA distributions and cap military retirees’ use of it.
- Assuming the answer for one state applies to another, or that the state answer changes the federal tax on the withdrawal.
Related: TSP withdrawal options, state tax on TSP withdrawals, Arkansas retirement taxes, how Arkansas taxes pensions, and how Arkansas taxes 401(k) and IRA withdrawals.
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Answer againSources
- 2025 AR1000F and AR1000NR Instructions: https://www.dfa.arkansas.gov/wp-content/uploads/2025_AR1000F_and_AR1000NR_Instructions.pdf
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Code, GovInfo): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 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.