Arkansas Code of 1987 (2023) › Title 26 - TAXATION (§§ 26-1-101 — 26-82-119) › Subtitle 5 - STATE TAXES (§§ 26-50-101 — 26-65-108) › Chapter 51 - INCOME TAXES (§§ 26-51-101 — 26-51-2804) › Subchapter 4 - COMPUTATION OF TAX LIABILITY (§§ 26-51-401 — 26-51-461) › Section 26-51-403 - Income generally

(a)
The term "net income" means the adjusted gross income of a taxpayer less the deductions allowed by the Income Tax Act of 1929, §
26-51-101
et seq.
(b)
"Adjusted gross income" means, in the case of an individual, gross income minus the following deductions:
(1)
Trade and business deductions otherwise allowable as deductions under this chapter that are attributable to a trade or business carried on by the taxpayer if the trade or business does not consist of the performance of services by the taxpayer as an employee;
(2)
Trade and business deductions of employees otherwise allowable as deductions under this chapter;
(3)
Deductions that consist of expenses paid or incurred by the taxpayer in connection with the performance by him or her of services as an employee under a reimbursement or other expense allowance arrangement with his or her employer;
(4)
Losses from the sale or exchange of property;
(5)
Deductions attributable to property held for the production of rents and royalties;
(6)
(A)
Certain deductions of life tenants and income beneficiaries of property.
(B)
In the case of a life tenant of property, an income beneficiary of property held in trust, or an heir, legatee, or devisee of an estate, the deduction for depreciation allowed by
26 U.S.C. § 167
, as provided in §
26-51-428
, and the deduction allowed by
26 U.S.C. § 611
, as provided in §
26-51-429
;
(7)
Deductions for certain portions of lump-sum distributions from pension plans taxed under
26 U.S.C. § 402(e)
, as set forth in §
26-51-414
;
(8)
Deductions for moving expenses, as set forth in §
26-51-423(a)(4)
;
(9)
Deductions for alimony payments;
(10)
Deductions for separate maintenance payments;
(11)
Deductions for interest forfeited to a bank, savings association, et cetera, on premature withdrawals from time savings accounts or deposits;
(12)
Deductions allowed for cash payments to individual retirement accounts and deductions allowed for cash payments to retirement savings plans of certain married individuals to cover a nonworking spouse;
(13)
Deductions for contributions by self-employed persons to pension, profit-sharing, and annuity plans;
(14)
The border city exemption as provided by §
26-52-601
et seq.;
(15)
Deductions for the health insurance costs of self-employed persons as computed in accordance with §
26-51-423(c)
;
(16)
Deductions for contributions to a long-term intergenerational trust created pursuant to the Long-Term Intergenerational Security Act of 1995, §
28-72-501
et seq.; and
(17)
Deductions for contributions to the Arkansas Brighter Future Fund Plan not to exceed five thousand dollars ($5,000) per taxpayer under §
6-84-111(b)
.
(c)
(1)
The net income shall be computed upon the basis of the taxpayer's annual accounting period, either fiscal or calendar year, in accordance with the method of accounting regularly employed in keeping the books of the taxpayer.
(2)
If no such method of accounting has been employed or if the method employed does not clearly reflect the income, the computation shall be made upon such basis and in such manner as in the opinion of the Secretary of the Department of Finance and Administration does clearly reflect the income.
(3)
If the taxpayer's annual accounting period is other than a fiscal year as defined by the Income Tax Act of 1929, §
26-51-101
et seq., or he or she has no annual accounting period, or does not keep books, the net income shall be computed upon the basis of the calendar year.
Amended by Act 2021, No. 966,§ 25, eff. 7/28/2021.
Amended by Act 2019, No. 910,§ 3711, eff. 7/1/2019.
Acts 1929, No. 118, Art. 3, § 7; Pope's Dig., § 14030; Acts 1969, No. 236, § 2; 1973, No. 182, § 4; A.S.A. 1947, § 84-2007; Acts 1987, No. 382, §§ 5, 6; 1989, No. 826, § 17; 1991, No. 685, § 1; 1993, No. 785, § 19; 1995, No. 1160, § 7; 1997, No. 1345, § 1; 2005, No. 1973, § 2.