The Income Subject to Tax section is used to review and allocate certain income items that may require separate reporting for Arkansas purposes. This section is especially important when filing as Married Filing Separately on the Same Return, because Arkansas allows taxpayers to allocate certain income items between spouses.
In addition, this section provides access to Arkansas schedules used to report interest and dividend income, capital gains and losses, and other income adjustments.
Program Entry
Arkansas Return → Income Subject to Tax
Rents and Royalties
Arkansas automatically allocates rental and royalty income between spouses when the filing status is Married Filing Separately on the Same Return.
If the automatic allocation is incorrect, enter the amount attributable to each spouse.
Taxpayer
Enter the taxpayer's portion of rental and royalty income.
Spouse
Enter the spouse's portion of rental and royalty income.
Examples of Rents and Royalties
Rental and royalty income may include:
- Rental property income
- Royalty income from mineral interests
- Oil and gas royalties
- Copyright royalties
- Patent royalties
- Other royalty-producing activities
How Does This Affect My Return?
The allocation determines which spouse reports the income on the Arkansas return and may affect each spouse's Arkansas tax liability.
Other Gains or (Losses)
Arkansas automatically allocates other gains and losses equally between spouses when filing as Married Filing Separately on the Same Return.
If the automatic allocation is not correct, enter the amount attributable to each spouse.
Taxpayer
Enter the taxpayer's share of gains or losses.
Spouse
Enter the spouse's share of gains or losses.
Examples of Other Gains and Losses
These amounts may include:
- Gains from the sale of business property
- Casualty or theft gains
- Certain gains reported on federal schedules
- Other gains or losses not reported as capital gains
How Does This Affect My Return?
Proper allocation ensures income and deductions are reported under the correct spouse and may affect the tax calculation for each individual.
Interest and Dividend Income Schedule (Form AR4)
Select Begin to complete Form AR4, Interest and Dividend Income.
What Is Form AR4?
Form AR4 is used to report interest and dividend income when additional detail is required for Arkansas purposes.
Examples of income reported on Form AR4 may include:
- Bank interest
- Credit union interest
- Certificate of Deposit (CD) interest
- Corporate dividends
- Mutual fund dividends
- Other investment income
When Is Form AR4 Required?
Form AR4 is generally used when reporting interest and dividend income that requires supporting detail beyond what is shown on the Arkansas return.
How Does This Affect My Return?
Income reported on Form AR4 is included in Arkansas taxable income and may affect the amount of tax due or refund received.
Other Income (Form AR-OI)
Select Begin to complete Form AR-OI, Other Income/Loss and Depreciation Differences.
What Is Form AR-OI?
Form AR-OI is used to report Arkansas additions to income, subtractions from income, and depreciation adjustments when Arkansas tax law differs from federal tax law.
The form allows taxpayers to report Arkansas-specific income modifications that are not reported directly on the Arkansas individual income tax return.
Additions to Income
The following entries may increase Arkansas taxable income.
Federal Depreciation
Arkansas does not always follow federal depreciation rules. Enter any federal depreciation adjustment that must be added back to income for Arkansas purposes.
HSA and/or MSA Taxable Distributions
Enter taxable distributions from:
- Health Savings Accounts (HSAs)
- Medical Savings Accounts (MSAs)
when Arkansas requires different treatment than the federal return.
Long-Term Care Insurance Contracts
Enter any Arkansas adjustment related to long-term care insurance contracts that must be added to income.
Gambling Winnings
Enter gambling winnings that must be included in Arkansas taxable income.
Examples include:
- Casino winnings
- Sports wagering winnings
- Racetrack winnings
- Bingo winnings
- Other gambling winnings
Lottery/Contest Winnings
Enter taxable lottery or contest winnings that must be reported for Arkansas purposes.
Examples include:
- State lottery winnings
- Multistate lottery winnings
- Contest prizes
- Promotional winnings
Scholarships/Fellowships/Stipends
Enter scholarship, fellowship, or stipend income that must be included in Arkansas taxable income.
Pass-Through Entity Addition
Enter any addition reported by a partnership, S corporation, trust, or estate that must be added to Arkansas income.
Name, Image and Likeness (NIL) Income Addition
Enter any Arkansas addition related to Name, Image, and Likeness (NIL) income.
NIL income generally includes compensation received for the use of an individual's:
- Name
- Image
- Likeness
Other Additions
Use this section to enter any Arkansas income addition not specifically listed elsewhere on Form AR-OI.
Subtractions From Income
The following entries may reduce Arkansas taxable income.
State Depreciation
Enter any Arkansas depreciation adjustment that reduces income because Arkansas depreciation differs from federal depreciation.
Net Operating Loss
Enter any allowable Arkansas Net Operating Loss (NOL) deduction.
An NOL may be available when prior-year business losses are eligible to offset current-year income.
Foreign Earned Income Exclusion
Enter any qualifying foreign earned income exclusion allowed for Arkansas purposes.
This generally applies to income earned while working outside the United States that qualifies for exclusion under applicable tax rules.
Loss on Excess Federal Distribution
Enter any allowable Arkansas subtraction related to excess federal distributions.
Pass-Through Entity Subtraction
Enter any subtraction reported by a partnership, S corporation, trust, or estate that reduces Arkansas taxable income.
Name, Image and Likeness (NIL) Income Subtraction
Enter any Arkansas subtraction related to Name, Image, and Likeness (NIL) income that qualifies for exclusion from Arkansas taxable income.
Other Subtractions
Use this section to report Arkansas income subtractions not specifically provided elsewhere on Form AR-OI.
How Does This Affect My Return?
Information reported on Form AR-OI may:
- Increase Arkansas taxable income.
- Decrease Arkansas taxable income.
- Report Arkansas depreciation differences.
- Report pass-through entity adjustments.
- Report gambling, lottery, scholarship, or other income adjustments.
- Affect the amount of Arkansas tax due or refund received.
Capital Gains (Form AR1000D)
Select Begin to complete Form AR1000D, Capital Gains Schedule.
What Is Form AR1000D?
Form AR1000D is used to report capital gains and losses from the sale or exchange of capital assets.
Examples include:
- Stocks
- Bonds
- Mutual funds
- Real estate held for investment
- Other capital assets
Information Reported on Form AR1000D
The schedule is used to calculate:
- Short-term capital gains and losses
- Long-term capital gains and losses
- Net capital gain or loss for Arkansas purposes
How Does This Affect My Return?
The net gain or loss calculated on Form AR1000D is included in Arkansas taxable income and may increase or decrease the amount of tax owed.
How Does This Affect My Return?
Information entered in the Income Subject to Tax section may:
- Allocate income between spouses.
- Report interest and dividend income.
- Report capital gains and losses.
- Report Arkansas-specific income adjustments.
- Report depreciation differences between federal and Arkansas law.
- Increase or decrease Arkansas taxable income.
Notes
- Taxpayers filing Married Filing Separately on the Same Return should review all income allocations carefully.
- Form AR4 is used to report interest and dividend income.
- Form AR-OI is used to report other income, losses, additions, subtractions, and depreciation differences.
- Form AR1000D is used to report capital gains and losses.
- Arkansas tax treatment may differ from federal tax treatment for certain depreciation, pass-through entity, and income adjustment items.
- Name, Image, and Likeness (NIL) income may require a separate Arkansas addition or subtraction adjustment.
- Keep copies of all schedules and supporting documentation used to complete the Arkansas return.