The Inflation Reduction Act of 2025 aims to amend the state income tax laws in Arkansas by removing the cap on increases to the standard deduction and individual income tax tables due to inflation. The bill ties these increases to a regional index of the Consumer Price Index (CPI), specifically the West South Central division of the South Region, as published by the United States Department of Labor. This change allows for adjustments to be made based on the actual inflation rate without the previous limitation of a maximum increase of three percent.

Key amendments include the removal of the cap on the cost-of-living adjustment for the standard deduction and individual income tax tables, which will now be adjusted annually based on the percentage increase in the CPI from the previous year. Additionally, the bill specifies that the adjustments will be rounded to the nearest ten dollars. The effective date for these changes is set for tax years beginning on or after January 1, 2025.

Statutes affected:
Old version HB1065 Original - 12-12-2024 10:37 AM: 26-51-201(d), 26-51-430(c)
Old version HB1065 V2 - 2-19-2025 11:02 AM: 26-51-201(d), 02-19-2025, 26-51-430(c)
HB 1065: 26-51-201(d), 26-51-430(c)