What to know about filing 2026 Arizona taxes
TUCSON, Ariz. (13 News) - You don’t have to wait to file your taxes. That’s the update from the Arizona Department of Revenue on Thursday, Jan. 22.
This year’s tax forms are done, and the standard deduction amount is already aligned with the IRS code. The changes were made in accordance with Governor Hobbs’ Executive Order 2025-15.
ADOR says that order did the following:
- Increased standard deduction
- Subtraction for seniors 65 and older
- Subtraction for qualified tip income
- Subtraction for qualified overtime compensation
- Subtraction for qualified vehicle loan interest
All of those, with the exception of the subtraction for a qualified vehicle loan interest, are included in the bill backed by the governor.
ADOR says the executive order significantly reduces the chances anyone will have to re-file, because it matched the standard deduction to that of the IRS. The republican bill did this as well.
While the executive order shaped the tax forms, it did so before the legislature, which was out of session at the time, could pass a law and decide what parts of the new IRS code the state wanted to adopt. That’s why the tax forms are aligned with the Democrats’ bill, and why ADOR says it would add high cost to the department, to adopt additional changes included in the Republican bill.
Democrats told 13 News they’re sticking to their bill – and Republicans said they’re still considering their options.
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People can start filing taxes on Monday, Jan. 26, but anyone who files early may have to make amendments.
That’s because the tax forms people would use may not be updated. The forms can’t be finalized until the changes to the tax code are made, and Arizona’s governor and lawmakers are still feuding over which changes to make.
There are two plans on the table.
One comes from the Republican party (SB 1106), which Hobbs vetoed on Jan. 16. Instead, she urged GOP lawmakers to pass the democrat proposal (HB 2531), which has not even been assigned to a committee by the Republican chair. That’s the first of several steps to get a bill passed.
Arizona Democrats are still backing HB 2531. An additional $6,000have not yet told us if they’ll try to override the veto, or if they will support another bill, but we will update this article when they respond.
Understanding SB 1106
The largest difference between the two bills is that the Republican-backed SB 1106 includes most changes that will apply to federal tax returns, after President Donald Trump signed the One Big Beautiful Bill last year (also known as H.R. 1).
The bill doesn’t include all the same provisions, and it even goes beyond the bill in some ways.
The Joint Legislative Budget Committee (JLBC) notes the following:
SB 1106 excludes the following provisions that are included in H.R. 1:
- An additional $6,000 deduction for seniors aged 65 and older.
- Increase of the state and local tax (SALT) deduction from $10,000 to $40,000.
- Deduction for new car auto loan interest.
SB 1106 adds the following policies beyond those included in H.R. 1:
- $6,000 deduction for distributions from a pension or retirement account for taxpayers 60 years of age and older.
- $6,000 deduction for contributions to Roth individual retirement accounts (IRA).
- Increase of the current dependent tax credit from $100 to $125 for dependents under 17 years old.
- Deduction for child and dependent care expenses in excess of the filer’s federal Child and Dependent Care Credit.
The IRS lists the full changes H.R.1 made to the tax code.
While SB 1106 includes most of those changes, the bill (HB 2531) Gov. Hobbs and democrats are backing does not. However, it does include a select few provisions – including changes to taxes on tips, overtime, and a deduction for seniors.
Major differences between the bills
- Standard Deduction
- Both bills increase this from $15,750 to $31,500
- Deduction for seniors
- HB 2531 includes $6,000 deduction
- SB 1106 does not include a deduction
- Deduction for retirement accounts
- SB 1106 includes a $6,000 deduction for distributions to a pension or retirement account for taxpayers 60 years or older
- SB 1106 also includes another $6,000 deduction for contributions to Roth IRA accounts
- HB 2531 does not include a deduction
- Deduction for qualified tips & overtime compensation
- Both bills include the same deduction; however, HB 2531 deductions end after 2028. SB 1106 deductions would be permanently codified in the Arizona tax code until the legislature changed it
Cost to the state budget
The JLBC estimates HB 2531 would cost the state general fund around $757 million over 4 years. SB 1106 would cost nearly double that, at $1.44 billion.
The Arizona Department of Revenue is responsible for creating tax forms for people to use to file their returns. The JLBC notes that the process is typically done by November or December “in time to print the materials and work with online tax preparation services.” ADOR did get the forms done, but they won’t necessarily match whichever route the state goes (depending on if it adopts SB 1106, HB 2531, or another option). That means people who file taxes with forms that don’t match the updated tax code may have to file amendments.
When should you file your taxes?
That’s not yet clear. It’s best to consult a tax expert on how to proceed. As a reminder, the deadline to file your taxes is Wednesday, April 15. People can apply for an extension, but any outstanding taxes owed are still due on April 15.
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