The Inflation Reduction Act of 2025 aims to amend Arkansas state income tax laws 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. The act will allow for annual adjustments to the standard deduction and tax tables based on the percentage increase in the CPI without a limit, which was previously capped at three percent.

Additionally, the bill specifies that the Secretary of the Department of Finance and Administration will be responsible for adjusting the standard deduction annually based on the CPI. The effective date for these changes is set for tax years beginning on or after January 1, 2025. The act is designed to provide more flexibility in tax adjustments in response to inflation, thereby potentially benefiting taxpayers in Arkansas.

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