Arkansas Veterans Tax Benefits 2026: Complete Guide for Military Buyers
Arkansas offers some of the most veteran-friendly tax policies in the South. If you’re PCSing to Little Rock Air Force Base, retiring from the military, or relocating to Central Arkansas after service, understanding these benefits can save you thousands of dollars every year. This guide consolidates every major Arkansas veterans tax benefit in one place — updated for 2025–2026.
Military Retirement Pay — Fully Tax-Exempt in Arkansas
This is the headline benefit: Arkansas exempts 100% of military retirement pay from state income tax. Whether you receive Army, Navy, Air Force, Marine Corps, Space Force, or Coast Guard retirement pay, none of it is subject to Arkansas state income tax.
This exemption was expanded to full exemption status and applies to all retired servicemembers regardless of age, disability rating, or retirement category (length of service, medical, TERA, PDRL, etc.). If you’re comparing states for retirement or PCS destinations, this alone puts Arkansas well ahead of states that tax military retirement.
Survivor Benefit Plan (SBP) Payments
SBP annuity payments received by surviving spouses are also exempt from Arkansas state income tax, consistent with the treatment of the underlying military retirement pay.
VA Disability Compensation — Always Tax-Free
VA disability compensation is exempt from both federal and Arkansas state income tax at all disability rating levels (0%–100%). This is federal law (38 U.S.C. § 5301) and Arkansas follows it completely.
This includes:
- Monthly VA disability compensation for service-connected conditions
- Dependency and Indemnity Compensation (DIC) paid to surviving spouses and dependents
- Special monthly compensation (SMC) for severe disabilities
- Clothing allowance for service-connected conditions
Veterans receiving both military retirement pay and VA disability compensation (concurrent receipt under CRDP or CRSC) benefit from both exemptions in Arkansas — the retirement pay is state-exempt, and the VA comp is federally and state exempt.
Property Tax Exemptions for Disabled Veterans
Arkansas provides significant property tax relief for veterans with service-connected disabilities. The benefit level scales with your disability rating:
| Disability Rating | Property Tax Benefit | Notes |
|---|---|---|
| 100% P&T (Permanent & Total) | Full exemption on homestead | Primary residence only; must apply with County Assessor |
| 100% (not P&T) | Partial exemption — $150,000 assessed value reduction | Apply annually with County Assessor |
| 70%–99% | Partial exemption — applies to a portion of assessed value | Contact county assessor for current rate |
| Any rating — surviving spouse | Full exemption continues after veteran’s death | Must not remarry to retain benefit |
How to Apply for the Property Tax Exemption
- Obtain your VA Rating Decision letter showing your disability percentage and P&T status (if applicable)
- Visit your county assessor’s office — for most LRAFB families, that’s Pulaski County Assessor (Little Rock/North Little Rock/Jacksonville) or Lonoke County Assessor (Cabot/Beebe)
- Submit the application form along with your DD-214, VA Rating Decision, and proof of Arkansas residency
- The exemption applies to the tax year in which you apply
Key county assessor contacts:
- Pulaski County: pulaskicountysheriff.com — (501) 340-6170
- Lonoke County Assessor: (501) 676-6344
- Saline County Assessor (Bryant/Benton): (501) 303-5620
- Faulkner County Assessor (Conway): (501) 450-4905
Arkansas Homestead Tax Credit
Every Arkansas homeowner — veteran or not — is eligible for the Homestead Tax Credit, which provides a $375 credit on property taxes for your primary residence each year. For veterans in lower-cost markets like Cabot, Jacksonville, or Bryant, this credit can offset a meaningful portion of your annual property tax bill.
You must register your homestead with the county assessor to receive this credit. You only need to register once — the credit renews automatically as long as the property remains your primary residence. Registration is typically done when you purchase the home.
Benefits for Surviving Military Spouses
Arkansas extends strong protections to surviving spouses of servicemembers:
- Property tax exemption continues after a 100% P&T veteran dies — the surviving spouse retains the full exemption as long as they do not remarry and remain in the home
- DIC payments (Dependency and Indemnity Compensation) are fully exempt from state income tax
- SBP annuity payments are exempt from state income tax
- Surviving spouses of servicemembers who died in the line of duty are eligible for additional state benefits through the Arkansas Department of Veterans Affairs
Arkansas State Income Tax — Overview for Military Families
Arkansas uses a graduated income tax structure. For 2025, the top marginal rate is 3.9% — one of the lower rates in the South. Here’s how military income is treated:
| Income Type | AR State Tax Treatment |
|---|---|
| Active duty military pay (stationed in AR) | Taxable — but BAH, BAS, and most allowances are exempt |
| Active duty military pay (stationed outside AR, AR domicile) | Taxable if AR is your state of legal domicile |
| Military retirement pay | 100% exempt |
| VA disability compensation | 100% exempt (federal & state) |
| BAH | Exempt — not included in gross income |
| BAS | Exempt — not included in gross income |
| SBP / DIC payments | Exempt |
| Military spouse income (MSRRA) | May be exempt if spouse maintains another state’s domicile |
Military Spouses Relief Act (MSRRA)
Under the Military Spouses Residency Relief Act, a military spouse in Arkansas solely to be with their servicemember may maintain their legal domicile in another state for income tax purposes. This is complex — consult a tax professional or the IRS website for current guidance.
Free Military and Veteran License Plates
Arkansas offers numerous free or discounted specialty license plates for veterans and active-duty military:
- Disabled Veteran plates: Free for veterans with service-connected disability rated 100% P&T; includes handicapped parking privileges
- Purple Heart plates: Free for Purple Heart recipients
- POW/MIA plates: Free for former POWs
- Veteran plates: Available at reduced cost for honorably discharged veterans
- Active duty plates: Available through the Arkansas Department of Finance & Administration
Apply through the Arkansas DFA Motor Vehicle Division with your DD-214 or VA Rating Decision as proof.
Frequently Asked Questions
Yes, the exemption applies to military retirement pay — not active duty pay. You must have retired from service (typically 20+ years or medical retirement) to receive this benefit.
Yes — your BAH and BAS are exempt from Arkansas income tax. If you’re 100% P&T, you can claim the full property tax exemption on your home purchase regardless of active/retired status.
Absolutely. A 100% P&T disabled veteran can use a VA loan ($0 down, no PMI, funding fee waived) AND receive the full property tax exemption — reducing monthly housing cost by $300–$600+ vs. a non-veteran buyer.
The Arkansas Department of Veterans Affairs (ADVA) is the official state resource. For federal VA benefits, visit va.gov.
Buying a Home Near Little Rock AFB?
Ashley Watters specializes in VA loans and PCS moves to Central Arkansas. She’ll help you use every benefit you’ve earned — including the VA loan, funding fee waiver, and property tax exemption.