Claiming Itemized Deductions in Arkansas

Itemized deductions allow Arkansas taxpayers to reduce their state taxable income by listing specific deductible expenses instead of taking the state’s standard deduction. This method involves calculating your deductions based on actual amounts spent on permissible costs, which requires careful record-keeping. The decision to itemize depends on whether your total eligible expenses are greater than the standard deduction for your filing status.

Standard Deduction vs Itemizing in Arkansas

The standard deduction is a fixed dollar amount you can subtract from your adjusted gross income (AGI) to reduce your tax bill. For the 2025 tax year, the Arkansas standard deduction is $2,410 for Single, Head of Household, and Married Filing Separately filers. The standard deduction is $4,820 for those with a Married Filing Jointly or Qualifying Widow(er) status.

To decide which method to use, you must first calculate the total of all your potential itemized deductions. If this total is greater than the standard deduction for your filing status, it is more advantageous to itemize. For example, a single filer with $4,000 in deductible expenses would save more by itemizing instead of taking the $2,410 standard deduction, resulting in a lower state tax liability.

Categories of Arkansas Itemized Deductions

Arkansas allows taxpayers to deduct a variety of expenses, which are reported on the state’s itemized deduction schedule. While these categories often mirror federal rules, there are some distinct differences. The primary categories include medical and dental expenses, taxes paid, home mortgage interest, and gifts to charity, each with its own set of rules and limitations that determine how much you can deduct.

Medical and Dental Expenses

Arkansas taxpayers can deduct costs for diagnosing, treating, or preventing disease. This includes payments for doctor visits, hospital care, prescriptions, and certain health insurance premiums not paid with pre-tax dollars. Transportation costs for medical care are also deductible. You can only deduct the amount of your total medical expenses that exceeds 10% of your state Adjusted Gross Income (AGI). For instance, if your AGI is $60,000, the first $6,000 of your medical expenses is not deductible, and you could only deduct the amount that surpasses this threshold.

Taxes You Paid

Arkansas allows a deduction for certain state and local taxes paid during the year, including state income taxes, real estate taxes on your primary residence, and personal property taxes. Unlike federal law, which imposes a $10,000 cap on this deduction (the SALT cap), Arkansas does not conform to this limitation. This allows Arkansas filers to deduct the full amount of their qualifying state and local taxes paid.

Interest You Paid

Arkansas taxpayers can deduct home mortgage interest paid on a principal and a second home. The state follows federal guidelines, limiting the deduction to interest on up to $750,000 of mortgage debt. This deduction also applies to points paid at the time of purchase and, in some cases, mortgage insurance premiums.

Gifts to Charity

You can deduct contributions made to qualified charitable organizations, including cash donations and the fair market value of donated property. For cash contributions, the deduction is limited to 60% of your Arkansas AGI. Similar percentage limits apply to non-cash donations. The contribution must be made to an organization recognized by the IRS as a qualified charity.

Casualty and Theft Losses

You may be able to claim a deduction for property damage or loss from a sudden or unexpected event like a fire, storm, or flood. Unlike current federal rules, Arkansas law allows for the deduction of these losses even if they do not occur in a federally declared disaster area. The amount of the loss is calculated using Federal Form 4684 and is the lesser of the property’s adjusted basis or the decrease in its fair market value, reduced by any insurance reimbursement you receive.

Other Deductions

Arkansas law provides for other miscellaneous itemized deductions, such as for gambling losses. You can deduct gambling losses up to the total amount of your winnings. These losses are reported as a miscellaneous deduction and are not subject to the 2% of AGI limitation that applies to some federal miscellaneous expenses.

Documentation and Recordkeeping for Deductions

Maintaining organized records is a requirement for anyone choosing to itemize. While you do not submit these documents with your tax return, you must keep them to substantiate your claims in the event of an audit by the Arkansas Department of Finance and Administration. State law requires taxpayers to retain records for at least six years.

For medical expenses, keep copies of bills from hospitals and doctors, receipts from pharmacies, and statements showing health insurance premium payments. A mileage log detailing travel to and from medical appointments is also necessary to claim transportation costs. To support the deduction for taxes paid, you should retain property tax statements, proof of payment, and W-2 forms showing state income tax withheld.

When deducting charitable contributions, a bank record like a canceled check or credit card statement is sufficient for any cash gift. For any single contribution of $250 or more, you must have a written acknowledgment from the charity that details the donation. For home mortgage interest, your lender will provide Form 1098, which shows the total interest you paid for the year.

How to Claim Itemized Deductions on Your Return

Itemized deductions in Arkansas are claimed using Form AR3, the Itemized Deduction Schedule. This schedule must be completed and filed with your main Arkansas individual income tax return, Form AR1000F.

You can obtain the current version of Form AR3 from the Arkansas Department of Finance and Administration website, and it is important to use the form for the specific tax year you are filing. The form is organized by deduction category, with specific lines for medical expenses, taxes paid, and other deductions.

The process involves transferring your calculated totals for each category onto the corresponding lines of Form AR3. After filling in all applicable lines, you will add them up to determine your total itemized deductions. This final number is then transferred to the specified line on your main Form AR1000F, where it will be subtracted from your adjusted gross income.