The state of Arkansas has made the following tax law changes for tax year 2023:
What's new for credits?
- Inflationary Relief Income - Tax Credit - Allows for full year Arkansas residents that have net income up to $103,600 an additional tax credit of up to $150.
- Additional Tax Credit for Qualified Individuals - An additional tax credit for an individual taxpayer with net income up to $26,100 who files a timely return.
- Philanthropic Investment in Arkansas Kids Program Scholarship Credit - Act 904 of 2021 creates a tax credit for eligible contributions made to a scholarship-granting organization. The total amount of credits awarded per year cannot exceed $6 million. Raised from the $2 million limit in previous years in the Act 237 (LEARNS Act)
- Credit for Developmentally Disabled Dependents (Act 191) - Removed the certification date of the form and made the certification valid for the lifetime of the developmentally disabled individual. The certification will follow the disabled individual and not the taxpayer, allowing it to be transferred from one caretaker to another without recertification. This certification form has been renamed AR1000-DD(formerly AR1000RC5).
- Historic Rehabilitation Credit (Act 650 and Act 651) - Act 650 increases the amount of the Arkansas Historic Rehabilitation Tax Credit and creates a tiered system to incentivize investment in smaller communities. It raised the credit from 25% of investment to a scale of 30%-40% depending on the population of the city in which the project occurs. Act 651 extended the application period end date from June 30th, 2025 to June 30th, 2030.
What's new for tax rates?
- Individual Income Tax Rate Reduction (Act 532) - For 2023 Marginal Income Tax rates have been adjusted; resulting in the top rate being reduced to 4.7%.
- Pass-Through Entity Tax - A form AR-OI is needed to back out the income or losses reported on the Pass-through level if you are an entity, or member of an entity, that includes in Pass-Through Entity Tax on the individual return.
- Remote Work (Act 1019) - A nonresident who is paid a salary, lump sum payment or any other form of payment for work inside and outside of Arkansas, is only taxed on the amount of income while physically located inside of Arkansas. For workers who preform all their duties outside of Arkansas, no income will be taxed.
- Teacher and Retired Teacher Death Benefits (Act 171) - 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.
You can read more about the changes to Arkansas Tax Law changes Here