In Arizona, taxable personal income is based on an individual’s federal adjusted gross income for the taxable year, subject to certain additions and subtractions, such as exemptions and deductions.
Tax Residence
Under what circumstances is an individual deemed resident in your state for personal income tax purposes?
Every individual who is in Arizona for other than a temporary or transitory purpose is a resident. There is a presumption under Arizona law that every individual who spends, in the aggregate, more than nine months of the taxable year within the state is a resident. This presumption may be overcome by competent evidence that the individual is in the state for a temporary or transitory purpose. Arizona statutes do not define the terms “temporary” and “transitory.” Arizona law further states that an individual who is domiciled in Arizona continues to be a resident even though temporarily absent from the state.
Rates
What are the applicable personal income tax rates?
Arizona’s individual income tax rates have always been graduated (progressive). The current levels range from 2.59% to a maximum of 4.54%. (See 2018 Arizona tax tables.)
Exemptions, Deductions and Credits
What exemptions, deductions, and credits are available?
Arizona personal and dependency exemptions are numerous. The basic exemptions are summarized below:
Filing Status/Qualification: Exemption
- Single: $2,200
- Married or head of household: $4,400
- Married couple with one dependent: $6,600
- Blind: $1,500
- Aged 65 or older: $2,300
For 2018, the Arizona standard deduction are:
- $5,312 for a single taxpayer or a married taxpayer filing a separate return.
- $10,613 for a head of household or a married couple filing a joint return.
Arizona provides several tax credits, including the following:
Credit for Contributions to Qualifying Charitable Organizations – Arizona provides an individual income tax credit for contributions to Qualifying Charitable Organizations of $800 for married filing joint filers and $400 for single, heads of household, and married filing separate filers that provide immediate basic needs to residents of Arizona.
Credit for Contributions to Qualifying Foster Care Charitable Organizations – Arizona provides an individual income tax credit for contributions to Qualifying Foster Care Charitable Organizations of $1,000 for married filing joint filers and $500 for single, heads of household, and married filing separate filers that provide immediate basic needs to residents of Arizona.
Public School Credit – An individual may claim a nonrefundable tax credit of $400 for married filing joint filers and $200 for single, heads of household and married filing separate filers for making contributions or paying fees directly to an Arizona public school for support of extracurricular activities.
Credit for Contributions to Private School Tuition Organizations – Arizona provides a tax credit of $555 for single, heads of household and married filing separate filers and $1,110 for married filing joint filers for contributions to private school tuition, which provides scholarships for students enrolled in Arizona private schools.
Credit for Contributions to Certified School Tuition Organizations – For those who donate the maximum amount allowed under the Credit for Contributions to Private School Tuition Organizations can make an additional donation to a Certified School Tuition Organization of $552 for single, heads of household and married filing separate filers and $1,103 for married filing joint filers.
Filing Requirements
What filing requirements and procedures apply?
The starting point for an individual is the individual’s federal adjusted gross income. An individual must complete a federal return before beginning the Arizona Form 140 or 140EZ. For calendar-year taxpayers, the filing deadline is on or before April 15 following the close of the calendar year. Sole proprietors report business income on the Arizona individual income tax return.
Returns made based on a fiscal year shall be filed on or before the fifteenth day of the fourth month following the close of the fiscal year. A.R.S. § 43-325(2).
For taxable years beginning from and after December 31, 2015, partnership returns are due on or before the fifteenth day of the third month following the close of the taxable year. A.R.S. § 43-325(3).
Employer Obligations
What obligations are imposed on the employer in relation to the collection and remittance of state personal income taxes (e.g., withholding)?
Arizona employers must withhold income tax from employee wages for services performed in Arizona. There are very few exceptions to the withholding requirement. The state income tax withholding is a percentage of the employee’s gross taxable wages. Withholding percentages are based on gross taxable wages. “Gross taxable wages” is the amount that meets the federal definition of “wages” contained in Internal Revenue Code § 3401. Withholding returns are filed quarterly on April 30, July 31, October 31, and January 31 for the preceding calendar quarter.
