Arizona State Tax Filing

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Arizona Tax Details

The Arizona Department of Revenue (ADOR) made several changes for the 2021 tax year. Both the standard deduction and tax threshholds were slightly increased, and a new tax bracket was created. Additionally, a new tax surcharge was implemented for 3.5% of taxable income above $250,000 or $500,000, depending on filing status. For those claiming certain Arizona credits for cash contributions, the date the contribution was made is now required.

A few new adjustments are available while some existing adjustments changed. For example, the subtraction for contributions to 529 college savings plans is now limited to $2,000 ($4,000 if married) per beneficiary instead of $2,000 ($4,000 if married) total. A new subtraction for contributions to a 529A, Achieving a Better Life Experience Account (ABLE) is also limited to $2,000 ($4,000 if married) per beneficiary. Another positive change is that the military pension subtraction for retired or retainer pay of the uniformed services increased from a maximum of $3,500 to 100% of the amount received in 2021.

Most notably, several new forms were added to give those with Small Business Income (SBI) the option to make the SBI election. The SBI election allows a tax rate of 3.5% to be used for 2021 income that qualifies as SBI, which may include income from interest, dividends, self-employment, capital gains or losses, rental properties, and more. SBI elections that aren't timely filed with the regular Arizona income tax return may be denied.

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