If you draw military retired pay and call Arkansas home, the state does not tax a dollar of it. Since tax year 2018, Arkansas has exempted 100 percent of military retirement pay from its income tax, with no cap and no age requirement, and the same law shields Survivor Benefit Plan (SBP) payments for the spouse or family member left behind. For a retiree with a $42,000 pension, that is roughly $1,100 to $1,600 a year that stays out of Little Rock's hands, and claiming it is one line on your state return.
What it is
The exemption comes from Act 141 of 2017. The Arkansas Department of Finance and Administration (DFA) states it plainly: "Beginning with tax year 2018, retirement benefits received by a member of the uniformed services as defined in this Act are exempted from the income tax."
The law is codified at Ark. Code Ann. § 26-51-307, and its subsection (e) is broader than most people expect. It exempts retirement benefits received by a retired member of any of the uniformed services: the Army, Marine Corps, Navy, Air Force, and Coast Guard, the reserve component of each of those branches, the National Guard of any state, the commissioned corps of the U.S. Public Health Service, and the NOAA Commissioned Officer Corps. So a Guard or Reserve retiree drawing retired pay at 60 is covered by the exact same words as a 20-year active duty retiree.
Survivors are written into the statute, not left to interpretation. Subsection (e)(1)(B) exempts "survivor benefits that are funded by the retirement pay of a member of the uniformed services." That is SBP. If you are a surviving spouse or other beneficiary receiving an SBP annuity, Arkansas does not tax it.
One clarifying line so nobody double-counts: VA disability compensation is federally tax free everywhere, so no state taxes it. This guide is about your DFAS retired pay and SBP, which some states still tax.
What it's worth
The honest math first. Our catalog carries this benefit at about $1,680 a year, modeled as roughly 4 percent of a $42,000 pension. That flat-rate shortcut runs high. Arkansas uses a graduated tax table, and the real number depends on what else is on your return. The worked figures below come straight from DFA's 2025 tax documents.
Here is the tax year 2025 math for a single retiree whose only income is a $42,000 military pension. Without the exemption, you would subtract the $2,470 standard deduction to get $39,530 of net taxable income, and the DFA 2025 Regular Income Tax Table puts the tax on that at $1,122. With the exemption, the tax is zero. That is the floor of what this benefit is worth in that scenario.
The ceiling is higher. If your pension sits on top of other taxable income, a civilian salary, rental income, IRA withdrawals, the pension dollars would otherwise be taxed at your marginal rate. At Arkansas's 2025 top rate of 3.9 percent, exempting $42,000 saves up to about $1,638.
Scale it to your own pension using the pension-only scenario from the 2025 table, single filer:
| Annual retired pay | 2025 tax without the exemption | With the exemption |
|---|---|---|
| $25,000 | $479 | $0 |
| $42,000 | $1,122 | $0 |
| $60,000 | $1,824 | $0 |
Two moving parts to know. First, Arkansas keeps cutting rates: the top rate was 3.9 percent for tax year 2025 and drops to 3.7 percent for tax year 2026, retroactive to January 1, 2026, under legislation signed in May 2026, so the dollar value of the exemption shrinks slightly as rates fall. Second, Arkansas is not a no-income-tax state. Your civilian salary, most TSP and IRA withdrawals beyond the exemptions below, and investment income are still taxable, so run your whole income mix, not just the pension line.
Who qualifies (and who doesn't)
You qualify if both of these are true:
- You receive retirement benefits as a retired member of the uniformed services. The statute covers all five Armed Forces branches, their reserve components, the National Guard of any state, the USPHS commissioned corps, and the NOAA corps.
- You are an Arkansas resident for income tax purposes. The exemption only matters where Arkansas could otherwise tax you.
Survivors qualify too. SBP and other survivor benefits funded by a member's retirement pay are exempt under the same subsection.
Who does not benefit:
- Veterans who separated without retiring. No retired pay means nothing for this exemption to exempt, and your VA disability compensation is already untaxed everywhere.
- Active duty members, for this particular benefit. Your pay while serving is covered by Arkansas's separate active duty pay exemption instead.
- Nonresidents. If your state of residence is elsewhere, that state's rules govern your pension, and some states still tax military retired pay.
- Federal civilian retirees. Civil Service and FERS pensions fall under Arkansas's general $6,000 retirement exemption, not this statute.
One interaction worth knowing: the military exemption replaced the general exemption for this income, it does not stack on top of it. Under § 26-51-307(f), a retiree claiming the military exemption cannot also claim the $6,000 exemption for traditional IRA or employer plan distributions, unless the military exemption claimed is under $6,000, in which case you can apply the difference to other retirement income. Since the military exemption is uncapped, you are almost always better off, but tell your tax software about both income streams so it applies the rule correctly.
How to claim it
There is no application, no VA paperwork, and no waiting period. The exemption rides on your annual Arkansas return. Based on the 2025 AR1000F instructions:
- File your Arkansas return, Form AR1000F for full-year residents, as usual.
- Enter your military pension on line 17. The instructions read: "Retirement benefits received by a member of the uniformed services are exempt from income tax. If you or your spouse had U.S. military pension compensation, enter gross amount in the applicable boxes provided for primary and spouse, regardless of filing status." Attach your 1099-R.
- Do not let software tax it. Your DFAS 1099-R arrives every January because retired pay is still federally taxable. When your software asks about the source, identify it as military retirement so it lands on line 17 instead of the taxable retirement lines 18A and 18B.
- Survivors do the same with SBP. The annuity arrives with its own 1099-R and is excluded the same way under the statute's survivor benefit language.
- Check one table detail: DFA's Low Income Tax Table qualifications say you do not qualify for that table if you use an exemption for military retirement. If your non-pension income is modest, compare both approaches before filing.
- Amend if you missed it. If you or a preparer mistakenly paid Arkansas tax on military retired pay in a recent year, you may be able to recover it with an amended return. Refund claims are subject to time limits, so ask DFA how far back you can amend before assuming the money is gone.
If anything about your situation is unusual, such as part-year residency or a non-spouse SBP beneficiary, confirm the treatment with the DFA Individual Income Tax section rather than guessing.
Deadlines
There is no separate application deadline. The exemption is claimed on your annual return, so the normal filing calendar is the only one that matters: the 2025 Arkansas return was due April 15, 2026.
Related benefits
- Arkansas protects your pay on both sides of retirement: the active duty pay exemption covers 100 percent of service pay while you are still serving.
- Compare states before you pick a landing spot: Alabama also exempts all military retired pay, and its SBP survivor annuity exemption mirrors what Arkansas wrote into § 26-51-307.
- Run the state benefits calculator to see the rest of the Arkansas stack, from the disabled veteran property tax exemption to license benefits.
What to do next
Make sure your pension is landing on line 17 of your Arkansas return, and if you are a survivor drawing SBP, make sure nobody is taxing it. Then find out what else you are leaving on the table. Start your free benefits scan and we will check you against over 4,000 federal and state benefits, each with a dollar value and an official source.