2023 What’s New

SPECIAL INFORMATION FOR TAX YEAR 2023
Form AR1000NR form now has check boxes for Remote Worker and Military Spouse. Please note if claiming Remote Worker status, a statement on company letterhead from the employer stating that no work was completed in Arkansas is needed and must be included with your return. If there was no withholding, a return is not required. Non-resident Military spouses must still submit the AR-MS and a copy of the military personnel’s W2. Non-resident military stationed in Arkansas should complete the AR-NRMILITARY form on our website and include a copy of their W2 or LES when first stationed in Arkansas. This will help avoid any letters for non-filed returns being sent out to these individuals.

Standard Deduction (Act 1 of the 2nd Extraordinary Session of 2021)

The standard deduction is now calculated by the Consumer Price Indexing based on inflation. This calculation has raised the standard deduction for the 2023 Tax Year to $2,340 for filing statuses 1, 3, 4, 5, and 6 and $4,680 for filing status 2.

DEVELOPMENTALLY DISABLED CREDIT (Act 191 of the General Session of 2023)

Eliminated the requirement for re-certification of a developmental disability that is expected to continue indefinitely. The form AR1000RC5 has been changed to AR1000-DD. The only change to the form, other than the name, is where it can be claimed on your return. If claiming this credit, you are required to use the AR1000TC form, complete line 8, and enter the child(ren)’s name(s) and social security number(s) on the form (8A-8F- one child per line). If this is the first time you use this credit, attach the AR1000-DD and the AR1000TC to your return. If your AR1000RC5 was valid on January 1, 2022, you will not be required to submit the AR1000-DD. This credit is now permanent and no longer requires a renewal every five (5) years; however, you must submit the AR1000TC every year. The credit will follow the child (no matter who the caretaker is) and can only be claimed on one tax return per year.

Remote Work (Act 1019 of the General Session of 2021)

Remote workers who perform all of their duties from outside Arkansas, no income would be taxed. If duties performed are a combination of inside and outside Arkansas, only the portion that reasonably can be allocated to work performed in Arkansas is taxable.

Additional Tax Credit for Qualified Individuals (Act 2 of the 2nd Extraordinary session of 2021)

An individual taxpayer with a net income under the established threshold and who timely files a tax return is allowed an additional tax credit of up to $60 per individual. The threshold limits were raised for the 2023 tax year to $26,100 and below.

Teacher and Retired Teacher Death Benefits (Act 171 of the General Session of 2023)

Among other issues addressed, Act 171 allows teacher and retired teacher death benefits from the Arkansas Teacher Retirement system to be distributed to multiple beneficiaries if requested or to the estate if no beneficiaries are named or survive to receive benefits. Such death benefits are exempt from Arkansas income taxes.

Tax Rate Reduction (Act 532 of the General Session of 2023)

Marginal Income Tax rates for 203 have been amended, and the top rate was reduced to 4.7% for Individual, Individual Composite, PET, and Fiduciary.

Corporate Income Tax and Corporate Composite rates were reduced to 5.1%.

Military Retirement Exemption (Act 358 of the General Session of 2023)

This allows taxpayers receiving military retirement or survivor benefits to receive the total amount of the $6,000 retirement exemption. If the taxpayer claimed a $5,999 or less exemption for military retirement, the remaining $6,000 exemption may be claimed for their employer-sponsored retirement. If their military pension is $6,000 or more, they cannot claim an exemption on their employer-sponsored retirement.

Effective Date of Appeals and Correspondence (Act 251 of the General Session of 2023)

When there is a deadline for correspondence, it must be marked as ACCEPTED on time if the postmark shows that it was mailed by the deadline.

Act 237 (LEARNS Act) - Increased the tax credit for Philanthropic Investment in Arkansas Kids Program incentive credit from $2 million to $6 million per tax year.

Act 365 – Eliminated the incentive credit for the Delta Music Commission and dissolved the Commission.

Act 650 - This act increases the amount of the Arkansas Historic Rehabilitation Tax Credit and creates a tiered system to incentivize investment in smaller communities:

  • Projects in cities with a population of less than 10,000 will receive a 40% credit.
  • Projects in cities with a population between 10,000 and 50,000 will receive a 35% credit.
  • Projects in cities with a population of 50,000 or more will receive a 30% credit.

Currently, the credit percentage for all projects is 25%, representing an increase for all projects.

Act 651 – Extended the application period for Historic Rehabilitation Major Project Credits end date from June 30, 2025, to June 30, 2030.

Act 652 – Established the Natural State Initiative pilot program, creating an incentive credit for tourism attraction projects. Credits awarded are dependent on expenditure thresholds and county unemployment rates.

For a complete list of the available business incentive credits and other changes to these credits, please visit: https://www.dfa.arkansas.gov/excise-tax/tax-credits-special-refunds