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Arizona Personal Income Tax Laws

Personal income taxes are levied by most U.S. states, while the few states lacking an income tax make up for the revenue in other ways. Arizona's personal income tax laws are relatively straightforward. Anyone who has earned an income within Arizona must file an Arizona personal income tax return. This obviously includes Arizona residents, but note that nonresidents who earn income through the ownership of property or any other activity that generates income within the state must also pay personal income taxes.

The starting point for Arizona’s personal income tax is your federal adjusted gross income (Arizona’s gross income). To find your taxable income, there are various additions and subtractions that should be applied to your gross income amount. Examples of additions to income include:

  • Interest income from non-Arizona municipal bonds (i.e. “Non-Arizona municipal interest”);
  • Ordinary income portion of lump-sum distributions excluded on your federal return;
  • Total federal depreciation; and
  • Medical savings account (MSA) distributions.

Examples of subtractions to income include:

  • Interest income received from United States government obligations (e.g. U.S. savings bonds and treasury bills);
  • Exclusion for federal, Arizona state or local government pensions (up to $2,500 per taxpayer);
  • Arizona state lottery winnings included as income on your federal return (up to $5,000 only); and
  • U.S. Social Security or Railroad Retirement Act benefits included as income on your federal return (the taxable amount).

In Arizona, taxpayers can either take a standard deduction or itemize deductions. The standard deduction amount is adjusted every year to account for inflation. When it comes to itemizing deductions, you can choose to itemize your Arizona tax return, even if you did not do so on your federal tax return. In general, Arizona’s itemized deductions parallel those on the federal tax return.

The following chart contains the most pertinent details of Arizona's personal income tax laws.

Code Section

43-1011, et seq.

Who is Required to File?

All Arizona residents and nonresidents that derive income from activity or ownership of property within the state; Partnerships are not taxable

Rate?

First $20,000, 2.87%; Next $29,999, 3.2%; Next $49,999, 3.74%; Next $199,999, 4.72%; Over $300,000, 5.04%

Federal Income Tax Deductible?

No

Federal Income Used as Basis?

Yes

Note: State laws are constantly changing -- contact an Arizona tax law attorney or conduct your own legal research to verify the state law(s) you are researching. See the Arizona tax code for more information.

More Information

For more information on income tax, in general, take a look at FindLaw’s tax law section. If you need legal advice or assistance regarding taxes, save yourself a possible visit from the IRS by hiring a tax lawyer.

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