Deductions and Exemptions

Standard Deduction and Itemized Deduction

As with federal income tax returns, the state of Arizona offers various credits to taxpayers. An individual may claim itemized deductions on an Arizona return even if taking a standard deduction on a federal return. For the most part, an individual may claim those deductions allowable as itemized deductions under the Internal Revenue Code. If claiming Arizona itemized deductions, individuals must complete and include Federal Form 1040, Schedule A, and, if applicable, an Arizona Schedule A with an Arizona return. These forms must be attached to their returns. For the standard deduction amount, please refer to the instructions of the applicable Arizona form and tax year.

 

Dependent Credit (Exemption)

One credit taxpayers inquire frequently on is the dependent tax credit. For tax years prior to 2019, Arizona allowed dependent exemptions for persons that qualify as dependents on a federal tax return. Starting with the 2019 tax year, Arizona allows a dependent credit instead of the dependent exemption. 

The credit is $100 for each dependent under 17 years of age and $25 each for all other dependents. The credit is subject to a phase out for higher income taxpayers. To get the dependent credit (exemption for years prior to 2019), individuals must enter all information requested under the dependent section on front of Forms 140, 140A, 140PY, or under the dependent section on page two of Forms 140PTC and 140X. If there are more dependents to enter, taxpayers can use the continuation sheet provided with each of these forms. Individuals want to include names, social security numbers, relationships and months the dependents lived in the home. Individuals who do not furnish this information may lose the dependent credit (exemption for years prior to 2019).

 

Other Exemptions

Arizona also allows exemptions for the following:

  • The taxpayer or their spouse is blind.
  • The taxpayer or their spouse is 65 years old or older. 
  • Each person age 65 or older (related or not), who is not otherwise claimed for a dependent credit (or a dependent exmption for tax years prior to 2019), if one of the following applies: 
  1. During the tax year, the taxpayer paid more than one-fourth of the cost of keeping this person in an Arizona nursing care institution, an Arizona residential care institution, or an Arizona assisted living facility. The cost must be more than $800.
  2. During the tax year, the taxpayer paid more than $800 for either Arizona home health care or other medical costs for the person.
  • An Arizona resident may claim an exemption for a parent or ancestor of a parent who is not claimed for an other exemption or dependent credit, if all of the following apply: 
  1. The parent or ancestor of a parent lived in a principal residence for the entire taxable year.
  2. The taxpayer paid more than one-half of the support and maintenance costs of the parent or ancestor of a parent during the taxable year.
  3. The parent or ancestor of a parent was 65 years or older during the taxable year.
  4. The parent or ancestor of a parent required assistance with activities of daily living, like getting in and out of bed or chairs, walking around, going outdoors, using the toilet, bathing, shaving, brushing teeth, combing hair, dressing, medicating or feeding.