Since Arkansas does not tax military retirement are we still eligible for the $6,000 deduction for IRA distributions?

[aznav]

Arkansas form AR1000F seems to allow the deduction, but the TurboTax program does not.

[BMcCalpin · Accepted solution]

TurboTax is working correctly. A taxpayer can choose to take the exclusion for all the military retirement benefit, or waive that and add the military retirement benefit to the other retirement benefits and apply the $6,000 exclusion. You cannot exclude the total military retirement benefit AND take the $6,000 exemption.

This is laid out in an opinion issued by the Arkansas Department of Finance and Administration (www.ark.org/dfa-act896/index.php/api/document/download/20180814.pdf) The opinion is full of legalese, but the salient line is

"A taxpayer claiming an exemption under subsection (e) of this section is not eligible for an exemption under subsection (a) of this section."

Subsection (e) refers to the total exemption of military retirement benefits; subsection (a) refers to $6,000 exclusion.