2022 Standard Deductions and Key Tax Changes
Phoenix, AZ—The Arizona Department of Revenue would like to inform taxpayers of the tax year 2022 annual adjustments for Arizona standard deductions, new tax credits, and the reduced tax rate for small business income tax. Tax year 2022 adjustments generally are used on tax returns filed in 2023.
Due Date for Calendar Year Filers
Because April 15, 2023 falls on a federal holiday, taxpayers have until Tuesday, April 18, 2023 to file their 2022 tax return. If filing an extension, the extended due date to file the income tax return is October 16, 2023 because October 15, 2023 falls on a Sunday.
2022 Arizona Standard Deduction Amounts Adjusted for Inflation:
- $12,950 for a single taxpayer or a married taxpayer filing a separate return;
- $25,900 for a married couple filing a joint return; and
- $19,400 for individuals filing a head of household return.
The standard deduction can be increased by 27% of the charitable deductions the taxpayer would have claimed if they had itemized their deductions. This increased amount cannot be claimed on Form 140EZ or 140A.
Updated Arizona Form A-4
Arizona's Individual Income Tax Withholding Form (Arizona Form A-4) has been updated to reflect Arizona's lower individual income tax rates. Every Arizona employer is required to make this form available to its Arizona employees by January 31, 2023. The new A-4 form has seven new withholding election rate boxes (0.5%, 1.0%, 1.5%, 2.0%, 2.5%, 3.0, 3.5%) while retaining both the zero withholding rate option and the line for additional Arizona withholding. If an employee fails to fill out the new A-4 form, the default rate will be 2.0%. Do not send these withholding forms to the Department, they should be kept by the employer and the employee with their tax records.
2022 Individual Income Tax Brackets
For 2022, the individual income tax brackets have been adjusted for inflation and reduced to two tax rates.
| Table X – Use Table X if your filing status is Single or Married Filing Separate | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||
| Taxable Income | Enter the taxable income amount. | Subtract | Enter the result | Multiply the amount entered in column (d) by | Add | This is your tax. Round the difference and enter this amount on the form. | ||||
| Is Over |
But NOT over |
|||||||||
|
$0 |
$28,653 |
- | $0 | = | X | .0255 | + $0 | = | ||
|
$28,652 |
And over |
- | $28,653 | = | X | .0298 | + $731 | = | ||
| Table Y – Use Table Y if your filing status is Married Filing Joint or Head of Household | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (a) | (b) | (c) | (d) | (e) | (f) | (g) | ||||
| Taxable Income | Enter the taxable income amount. | Subtract | Enter the result | Multiply the amount entered in column (d) by | Add | This is your tax. Round the difference and enter this amount on the form. | ||||
| Is Over |
But NOT over |
|||||||||
|
$0 |
$57,305 |
- | $0 | = | X | .0255 | + $0 | = | ||
|
$57,305 |
And over |
- | $57,305 | = | X | .0298 | + $1,461 | = | ||
Arizona Small Business Income (SBI) Tax
Beginning with tax year 2021, individuals may elect to report their small business income on Arizona Form 140-SBI, Small Business Income (SBI), for the small business income included in their federal adjusted gross income. The SBI tax return must be filed timely with the regular income tax return to be accepted. The tax rate applicable to small business taxable income reported on Forms 140-SBI, 140PY-SBI, or Form 140NR-SBI was reduced from 3.5% in 2021 to 3.0% for 2022.
Repealed Individual Tax Credits
Beginning with tax year 2022, the following individual income tax credits have been repealed.
- Pollution Control Credit (Form 315)
- Employment by a Healthy Forest Enterprise Credit (Form 332)
Affordable Housing Tax Credit (Form 354)
Beginning with tax year 2022, Arizona allows an individual taxpayer to claim a nonrefundable tax credit for projects in this state that qualify for the federal low-income housing tax credit under section 42 of the Internal Revenue Code that are placed in service from and after June 30, 2022 in an amount equal to at least fifty-percent of the amount of the federal credit allowed in each taxable year during the federal credit.
The tax credit may be claimed on either the individual’s personal income tax return (Form 140, 140NR, or 140PY) or the Small Business Income tax return, if filing (Form 140-SBI, 140NR-SBI, or 140PY-SBI).
Pass-Through Entity (PTE) Tax (Credit Form 355)
Beginning with tax year 2022, Arizona allows an individual partner or an individual shareholder of a partnership/S Corporation a nonrefundable tax credit for the taxes paid by the PTE on the individual’s behalf for their share of the income distributed to the partner/shareholder. If the allowable credit exceeds the taxes otherwise due on the claimants income, or if there are no taxes due, the amount of the claim not used to offset taxes may be carried for not more than five consecutive taxable years as a credit against subsequent years’ income tax liability.
An individual taxpayer who claims the allowable PTE tax credit must also adjust their Arizona gross income by adding the amount of the tax payment made by the PTE for which the tax credit is claimed. A taxpayer should report the add-back adjustment on page 5, “Other Additions to Arizona Gross Income” and included in the total amount reported on the income tax return.
For more tax changes, including increases in certain tax credits, see Individual Income Highlights.
Wednesday, December 14, 2022