How to Find Your Net Tax on Line 38 of Form AR1000F

Filing your Arkansas state tax return requires careful attention to Form AR1000F, particularly Line 38, which determines your net tax liability. This figure represents the amount owed after income calculations, deductions, and credits. Understanding how to reach this number ensures accuracy and helps avoid penalties or delays.

Several key steps influence what appears on Line 38, including selecting the correct filing status, reporting income, claiming deductions, and applying eligible tax credits. Each of these elements affects your final tax obligation.

Determining Filing Status

Selecting the correct filing status on Form AR1000F is one of the first steps in calculating your Arkansas state tax liability. The state recognizes five filing statuses: Single, Married Filing Jointly, Married Filing Separately on the Same Return, Married Filing Separately on Different Returns, and Head of Household. Each status affects tax rates, standard deduction amounts, and credit eligibility.

For individuals unmarried as of December 31, Single status is typically the default. However, those who provide more than half the financial support for a qualifying dependent, such as a child or elderly parent, may qualify for Head of Household status, which offers lower tax rates and a higher standard deduction.

Married couples can file jointly or separately. Filing jointly often results in a lower tax burden due to broader income brackets and increased deductions, but separate filings may be beneficial if one spouse has significant medical expenses or other itemized deductions subject to income thresholds. Arkansas also allows a unique option: Married Filing Separately on the Same Return. This status permits couples to report income separately while filing a single return, simplifying the process compared to filing two separate returns.

Lines for Income and Adjustments

Taxable income on Form AR1000F is determined by aggregating various income sources before applying adjustments that may lower the total. Arkansas taxes wages, salaries, business income, rental earnings, capital gains, and certain retirement distributions. Some income, such as Social Security benefits, may be partially or fully exempt depending on specific thresholds.

Self-employed individuals must report business profits from federal Schedule C, which flow through to the state return. Rental property owners must include net rental income, factoring in allowable deductions such as depreciation, mortgage interest, and maintenance expenses. Capital gains receive preferential treatment in Arkansas, with 50% of net gains excluded from taxation.

Adjustments to income can significantly impact taxable earnings. These include deductions for contributions to retirement accounts, certain educator expenses, and student loan interest payments. Arkansas also allows a deduction for health savings account (HSA) contributions. Military retirement pay is fully exempt from state taxation, providing relief to retired service members.

Deductions

Deductions reduce taxable income, lowering overall tax liability. Arkansas taxpayers can choose between the standard deduction and itemizing eligible expenses, depending on which option provides the greater benefit.

Standard

The standard deduction is a fixed amount that reduces taxable income without requiring documentation of specific expenses. For the 2023 tax year, Arkansas allows a standard deduction of $2,200 for Single, Married Filing Separately on Different Returns, and Head of Household filers. Married couples filing jointly or separately on the same return can claim $4,400.

Unlike federal tax law, Arkansas does not adjust the standard deduction for inflation annually. Taxpayers should compare their total potential itemized deductions to the standard deduction to determine which option provides the greatest tax savings.

Itemized

Itemizing deductions allows taxpayers to claim specific expenses that qualify under Arkansas tax law. Common deductions include mortgage interest, state and local taxes paid, medical expenses exceeding 7.5% of adjusted gross income (AGI), and charitable contributions.

Arkansas follows federal guidelines for many itemized deductions but imposes some differences. State and local tax deductions, including property taxes, are not capped at $10,000 as they are under federal law. Charitable contributions must be made to qualified organizations, and proper documentation, such as receipts or bank records, is required for deductions exceeding $250.

Medical expenses can be deducted only if they surpass 7.5% of AGI. Those considering itemizing should maintain detailed records of eligible expenses throughout the year.

Miscellaneous

Certain deductions do not fall under standard or itemized categories but can still reduce taxable income. These include deductions for tuition paid to Arkansas colleges, contributions to the Arkansas Tax-Deferred Tuition Savings Program (529 plan), and certain military-related expenses.

The state allows a deduction for tuition paid to in-state higher education institutions. Contributions to a 529 plan are deductible up to $5,000 per taxpayer ($10,000 for married couples filing jointly), and withdrawals remain tax-free if used for qualified education expenses.

Military personnel stationed outside Arkansas may deduct income earned while serving in another state, provided they maintain Arkansas residency. Certain moving expenses related to military relocation may also be deductible. Taxpayers should review Arkansas tax regulations to determine eligibility.

Calculating Tax

Once taxable income is determined, Arkansas applies a progressive tax structure. For 2023, the state uses a tiered system with rates ranging from 2% to 4.7%, depending on income level. Individuals with taxable income up to $5,099 pay 2%, while those earning between $5,100 and $10,299 are taxed at 3%. The highest rate of 4.7% applies to income exceeding $10,300.

Arkansas distinguishes between full-year and part-year residents, as well as nonresidents with in-state income. Part-year residents must prorate their tax liability based on the portion of income earned while living in the state, while nonresidents are taxed only on Arkansas-sourced earnings. The state provides a worksheet to help allocate income appropriately.

Credits

Tax credits directly reduce the amount owed on Form AR1000F. Arkansas provides multiple credits, including those for individuals, economic incentives, and special circumstances. Some credits are refundable, meaning they can result in a refund even if no tax is owed, while others only reduce the amount due.

Personal

Arkansas offers a $29 per-person tax credit for each filer and dependent listed on the return. The state also provides a credit for taxpayers aged 65 or older.

For those with dependents, the Child Care Credit allows a percentage of the federal child care expenses to be claimed on the Arkansas return. This credit is nonrefundable, meaning it can only reduce the tax owed to zero but does not generate a refund. Individuals with disabilities may also qualify for specific credits, such as the Developmental Disability Credit.

Economic

Economic credits encourage behaviors such as homeownership or business investment. The Arkansas Historic Rehabilitation Tax Credit provides incentives for restoring historic properties, allowing homeowners and developers to claim a percentage of qualified rehabilitation expenses. This credit can be carried forward if it exceeds the tax owed in a given year.

The Low-Income Housing Tax Credit supports affordable housing development by offering credits to property owners who provide rental units at reduced rates. Arkansas also offers credits for businesses that create jobs in the state, such as the Advantage Arkansas Credit, which rewards companies for expanding operations and hiring local workers.

Additional

Other credits address unique situations, such as military service or disaster recovery. The Military Pay Credit benefits active-duty service members by reducing their tax liability on certain types of income. Arkansas also provides credits for taxpayers affected by natural disasters.

Education-related credits include the Tuition Credit for students attending in-state institutions. Individuals who contribute to an Arkansas 529 plan may qualify for a credit that encourages saving for future educational expenses.

Balances: Refunds or Amounts Owed

After applying deductions and credits, the final balance on Form AR1000F determines whether a taxpayer is due a refund or must make an additional payment. If total tax payments, including withholding and estimated tax payments, exceed the calculated liability, the taxpayer will receive a refund. If the tax owed is greater than what has already been paid, the remaining balance must be settled by the filing deadline to avoid penalties and interest.

Arkansas allows taxpayers to receive refunds via direct deposit or paper check. Those who owe taxes can pay electronically through the Arkansas Department of Finance and Administration’s online portal, by mailing a check, or through third-party payment processors. If unable to pay in full, taxpayers may request a payment plan, though interest and penalties may still apply.

Submission Procedures

Filing Form AR1000F can be done electronically or by mailing a paper return. E-filing is recommended for faster processing and reduced errors. Many taxpayers qualify for free e-filing through the Arkansas Free File program.

Paper returns must be mailed to the Arkansas Department of Finance and Administration. Taxpayers should ensure all required documents, such as W-2s, 1099s, and supporting schedules, are included to prevent delays. If filing close to the deadline, using certified mail or a delivery service with tracking can provide proof of timely submission.