Arizona tax deductions and write-offs (2026)

No. Arizona fully exempts military retired pay from state income tax (full exemption in place since tax year 2021). Other retirement income: Private pensions and 401(k)/IRA withdrawals are taxed at Arizona's flat rate with no general retirement exclusion.

Yes. Private pensions and 401(k)/IRA withdrawals are taxed at Arizona's flat rate with no general retirement exclusion.

No. Arizona excludes Social Security retirement benefits (Title II) from state income tax for all taxpayers. Statutory basis: A.R.S. 43-1022, which subtracts the amount included in federal AGI under IRC section 86.

No: Arizona doesn't offer a state earned income credit. No state earned income tax credit as of tax year 2026. Arizona does offer a child tax credit: Dependent Tax Credit: $125 per dependent under 17 (up from $100 starting tax year 2026) and $25 per dependent 17 or older. Reduced by 5% per $1,000 of federal AGI above $200,000 ($400,000 joint). Nonrefundable.

Only instead of income tax: itemizers in Arizona pick sales tax (5.6% state rate, about 8.54% with local taxes) or state income tax, whichever is bigger. Levies a transaction privilege tax (TPT) instead of a sales tax; groceries are exempt from the state portion, but some cities tax them, and some cities apply a lower tiered rate to the portion of a single item above a set price.

Yes on your federal return if you itemize, within the $40,400 SALT cap. Arizona adds its own break: Property tax credit (Form 140PTC) up to $502 for homeowners and renters 65+ or on SSI with very low household income.

Yes: Arizona offers the Property Tax Credit (Form 140PTC). Refundable credit for very low-income seniors and SSI recipients who rent or own their Arizona home, up to $502, claimed on Form 140PTC. Age 65+ or receiving Title 16 SSI; full-year Arizona resident; household income under $3,751 if living alone or under $5,501 with others; renters must have rented the whole year.

Partly: Arizona's Vehicle License Tax (VLT) is based on your vehicle's value, so it's deductible as personal property tax if you itemize. VLT is $2.89 per $100 of assessed value (60% of base retail price, reduced 16.25% per year); it replaces personal property tax.

Arizona has a flat 2.5% income tax, doesn't tax Social Security, and gives dollar-for-dollar credits for gifts to qualifying charities and school tuition organizations.

Yes on your Arizona return: $2,000 single / $4,000 joint per beneficiary. Contributions to any state's 529 plan count. Tax parity state: contributions to any state's 529 qualify; nonqualified withdrawals are added back up to amounts previously subtracted.

Yes: Dependent Tax Credit: $125 per dependent under 17 (up from $100 starting tax year 2026) and $25 per dependent 17 or older. Reduced by 5% per $1,000 of federal AGI above $200,000 ($400,000 joint). Nonrefundable.

Yes, as a business expense: Arizona charges $50 ($85 expedited) to form an LLC; ongoing: None. Publication of formation notice required within 60 days unless statutory agent is in Maricopa or Pima County (ACC publishes online).