Frequently Asked Questions - 2019 Individual Income Tax Changes
1. Are Arizona itemized deductions the same as the federal itemized deductions?
Arizona itemized deductions are the same as the federal itemized deductions except:
- All qualified medical expenses are allowed.
- Any charitable donations claimed on the federal return for which an Arizona credit is claimed, must be removed from the Arizona itemized deductions.
- Arizona will allow a deduction for mortgage interest not allowed on the federal return due to claiming a federal mortgage credit.
2. Did Arizona’s standard deduction increase for 2019?
Arizona’s standard deduction for 2019 more than doubled from the 2018 standard deduction. The 2019 standard deduction amounts are $12,200 for single, $18,350 for head of household or $24,400 for married filing joint. In addition, the standard deduction may be increased by 25 percent of the charitable deductions the taxpayer would have been able to claim if the taxpayer had claimed itemized deductions. The increased amount for charitable deductions may not be claimed on Arizona Forms 140A or 140EZ.
3. Did the tax rates go down for 2019?
For most individual taxpayers the tax rates dropped in 2019. The number of tax brackets dropped from five to four brackets. The two lowest tax brackets were combined, and both now apply the lowest tax rate of 2.59 percent (taxpayers previously in the second tax bracket paid 2.88 percent in 2018). The top three brackets all dropped by small amounts.
4. Is it true that personal exemptions will no longer be available in 2019?
Personal exemptions are indeed no longer available starting in 2019. However, for those that claim the standard deduction, the loss of the personal exemptions is more than made up by the increase in the standard deduction.
5. Will taxpayers still be able to claim dependent exemptions in 2019?
The dependent exemptions will no longer be available. However, the exemption is replaced by a dependent tax credit. The dependent credit is $100 for each dependent under the age of 17 and $25 for each dependent that is age 17 or over. The dependent must meet the federal dependent requirements. The credit is phased out for those taxpayers with federal adjusted gross income over $400,000 for married filing joint and over $200,000 for all others.
6. Are the exemptions for being blind or over 65 still available?
Yes, the exemptions for the taxpayer or the taxpayer’s spouse being blind or over 65 remain unchanged.
7. In prior years some exemptions for people who did not qualify as dependents on the federal return were allowed to be claimed on the dependent line of the Arizona return. Are these exemptions still allowed?
The following exemptions, previously allowed on the dependent line of the return are now allowed on the “other exemptions” line of the return:
- There is $2,300 for each person 65 years of age or older regardless of the person’s relationship with the taxpayer:
- If the taxpayer pays for more than one-fourth of the total cost of maintaining that person in a nursing care institution, residential care institution or assisted living facility if such payments exceed $800 in the taxable year.
- If the taxpayer otherwise makes payments exceeding $800 in the taxable year for home health care or other types of medical care.
- There is $2,300 for each birth for which a certificate of birth resulting in stillbirth was issued if the child would have otherwise become a member of the taxpayer’s household. Allowed in the year in which the stillbirth occurred.
The exemption on the “other exemptions” line is instead of any other exemption or credit for the same individual.
8. On their federal individual income tax return taxpayers are allowed a 20 percent deduction for “Qualified Business Income” (QBI); does Arizona allow a similar deduction?
The starting point for the Arizona individual income tax return is the federal adjusted gross income (FAGI) determined on the federal return. This number is then adjusted for specific Arizona additions, subtractions, deductions and exemptions to determine Arizona taxable income. The deduction taken on the federal return for qualified business income (QBI) is taken after the determination of FAGI on the federal return; therefore, the deduction is not part of Arizona’s starting point. In addition, Arizona does not have an Arizona specific adjustment to allow the QBI deduction. Therefore, QBI may not be deducted on the Arizona return.