What taxes do you pay when you sell a house in Arkansas?

Under 26 U.S.C. 121 you can exclude up to $250,000 of gain on the sale of a main home, or up to $500,000 on a joint return. The test is ownership and use: during the five years ending on the sale date, you must have owned the home and used it as your principal residence for periods adding up to two years or more. Those 24 months do not have to be one unbroken stretch.

It is not a once in a lifetime break. You can use it again, but only once in any two-year period. It does not apply if you acquired the property through a like-kind exchange within the past five years. If you sell at a loss on a personal residence, you cannot deduct it.

Arkansas adopts the federal home-sale exclusion outright. Ark. Code Ann. 26-51-404 adopts 26 U.S.C. 121 for computing Arkansas income tax, and the state's own return instructions repeat the same dollar limits and the same two-year test. So if the federal exclusion covers your gain, Arkansas is generally covered too.

If gain is still left over, Arkansas is unusually kind to it. The state taxes only half of your net long-term capital gain: Form AR1000D multiplies the net long-term gain by 50 percent, and that half flows into your regular income. Short-term gain, from a house held a year or less, is taxed in full. There is no separate Arkansas capital gains rate, so the taxable portion is taxed at ordinary Arkansas rates, which top out at 3.7 percent for tax years beginning in 2026.

If you have already moved out of state, Arkansas still wants a return. Nonresidents who received any gross income from Arkansas sources must file, regardless of filing status or amount, on Form AR1000NR.

Start with what the house cost you, then add what you spent improving it. The IRS counts work that adds value, prolongs the home's life, or adapts it to new uses: a new roof, new siding, an added bathroom or bedroom, a garage, a heating system, central air, a kitchen modernization. It does not count repairs and maintenance that simply keep the house in good condition, like painting, fixing leaks, filling cracks, or replacing broken hardware. One exception worth knowing: when repairs are done as part of an extensive remodel, the whole job counts as an improvement.

On the other side, your costs to sell come off the sale price before the gain is figured. Keep receipts for improvements as long as you own the house. Decades of small projects are the difference between a taxable gain and no gain at all, and nobody reconstructs them from memory at closing.

This is where sellers get surprised. The exclusion does not cover the part of your gain equal to depreciation you were allowed after May 6, 1997. That piece is reported as unrecaptured section 1250 gain and is taxed federally at a maximum rate of 25 percent, no matter how long you owned the house.

Time the house was not your main home can also shrink the exclusion. Periods after December 31, 2008 when the property was not the principal residence of you or your spouse count as nonqualified use, with carve-outs for the stretch after you move out within the five-year window, for qualified official extended duty, and for limited temporary absences. If the house was ever rented, take the numbers to a tax professional before you assume anything.

You may or may not receive a Form 1099-S for the sale. The closing company can skip filing one on a residence selling for $250,000 or less, or $500,000 where the certification includes an assurance that the seller is married, if it obtains a written certification from you. That certification is the closing company's to rely on, not the seller's to elect, and many closers file the form regardless.

The certification asks you to assure three things under penalty of perjury: that the home was your principal residence, that the full gain is excludable under section 121, and that there has been no period of nonqualified use after December 31, 2008. If you do receive a 1099-S, or if you cannot exclude all of your gain, report the sale on your return.

None of the tax rules. The federal test turns on your ownership and your use of the home, and federal law measures what you realized as the money and property you receive. Neither one asks who bought the house or how they paid. A different sale price changes your gain; it does not change the rules that apply to it.

What a cash sale changes is everything around the tax: no lender, no repairs, no showings. We buy as-is after one quick walkthrough, you get a guaranteed cash offer within 24 hours, we cover the typical closing costs, meaning the title work, and we close in less than 10 days, or on your timeline. What you owe on the gain is between you and your tax professional either way.