Arizona imposes a state income tax on residents. Rates used to vary based on income levels. They implemented a progressive tax system. It meant higher income levels were taxed at higher rates. Here is a quick guide on personal income taxes and deductions in the state of Arizona:

Tax Rates for 2024

Arizona’s flat personal income tax rate is 2.5% in 2024. All individuals shall now pay the same tax rate. Arizona’s previous progressive tax system had multiple tax brackets. It ranged from 2.59% to 4.5%.

The flat rate for personal income tax simplifies the tax system in Arizona. It allows individuals to calculate their tax liabilities easily. This intends to lessen the tax burden on high-income taxpayers and attract businesses.

Top Personal Tax Deductions in Arizona in 2024

There are several personal tax deductions you can avail in Arizona. These can help reduce your taxable income.

1. Standard Deduction

• Arizona adheres to the federal standard deduction amounts. For 2024, these amounts are:
  • $13,850 for Single filers
  • $27,700 for Married Filing Jointly
  • $20,800 for Head of Household
• Additional Deduction: Charitable contributions qualify as standard deduction in Arizona. Donations must be made to legitimate charitable organizations to qualify.

2. Itemized Deductions

Choosing itemized deductions allows you to deduct certain expenses. This is similar to federal itemized deductions.

• Medical and Dental Expenses: Deductible if they exceed 7.5% of your adjusted gross income (AGI).
• State and Local Taxes: The total deduction on state income taxes or sales taxes is capped at $10,000.
• Mortgage Interest: $750,000 is the cap on deductible mortgage interest on loans.
• Charitable Contributions: Deduct donations made to legitimate and qualified charitable organizations.
• Casualty and Theft Losses: Losses from federally declared disaster areas are eligible deductions.

3. Dependent Tax Credit

• Arizona’s dependent tax credit is $100 per dependent under 17. It is $25 per dependent aged 17 and older.

4. Contributions to 529 College Savings Plans

• Deduct contributions made to Arizona’s 529 College Savings Plan. This can be up to $2,000 per year for single filers. It is $4,000 per year for married couples filing jointly.

5. Public School Tax Credit

• Donations made to public schools in Arizona are credited up to $200 for single filers. It is $400 for joint filers. Contributions are used to fund extracurricular activities or character education programs.

6. Private School Tuition Organization (STO) Credit

• Claim a tax credit for donations to eligible school tuition organizations. The maximum credit is $1,307 for single filers. It is $2,609 for married couples filing jointly.

7. Qualifying Charitable Organizations Credit

• Claim a tax credit for contributions to qualifying charitable organizations. They must be providing services to the working poor. The maximum credit is $400 for single filers. The amount is $800 for joint filers.

8. Qualifying Foster Care Charitable Organizations Credit

• Claim a tax credit for contributions to qualifying foster care charitable organizations. The maximum credit is $500 for single filers and $1,000 for joint filers.

9. Military Pension Exemption

• Military retirement pay of up to $3,500 of can be excluded from taxable income.

10. Retirement Savings Contributions Credit

• Deduct credit for contributions to retirement savings accounts. It depends on your income level in Arizona.

Deductions and credits lower your tax liability. Consulting with a tax professional who is familiar with personal income taxes and deductions in Arizona to maximize the benefits​.