Tax Changes to Know before You File Your 2021 Return

Each year, key changes are made to Arizona’s tax code. Here are some highlights you should know:

Due Date for Calendar Year Filers

Because April 15, 2022 falls on a federal holiday, taxpayers have until Monday, April 18, 2022 to file their 2021 tax return. If filing an extension, the extended due date to file the income tax return is October 15, 2022. However, because October 15, 2022 falls on a Saturday, taxpayers have until Monday, October 17, 2022 to timely file the 2021 tax return.

2021 Arizona Standard Deduction Amounts Adjusted for Inflation:

• $12,550 for a single taxpayer or a married taxpayer filing a separate return; 
• $25,100 for a married couple filing a joint return; and
• $18,800 for individuals filing a head of household return. 

The standard deduction can be increased by 25% 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. 

2021 Tax Surcharge*

Proposition 208, passed by voters in the last election, applies to tax year 2021 and requires individuals with taxable income of more than $250,000 (single and married filing separate) and more than $500,000 (married filing joint and head of household) to pay an additional tax surcharge. See more at: https://azdor.gov/news-events-notices/news/arizona-estimated-tax-payment-notice-new-surcharge-tax

Arizona Small Business Income (SBI) Tax

On July 9, 2021, Governor Doug Ducey signed into law Senate Bill 1783 creating a small business income tax by enacting Arizona Revised Statute (A.R.S.) § 43-1701 effective for tax years beginning from and after December 31, 2020. The small business income tax rate for tax year 2021 is 3.5% on the amount of a taxpayer’s computed Arizona small business taxable income.  

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. For more information, visit:

https://azdor.gov/individual-income-tax-information/small-business-income-and-surcharge-guidance

Military Pension Subtraction

For 2021 the subtraction for benefits, annuities and pensions as retired or retainer pay of the uniforms services has increased from a maximum of $3,500 to 100% of the amount received during 2021. This means that benefits, annuities and pensions as retired or retainer pay of the uniformed services are no longer taxable in Arizona.

For more tax changes, including increases in certain tax credits, see Income Highlights.

*On March 11, 2022, the Maricopa Superior Court ruled that Proposition 208 is unconstitutional and permanently barred collection of the surcharge.

Wednesday, December 15, 2021