#Az 2022 tax brackets code#

By limiting the top combined rate to 4.5 percent, SB 1827 effectively reverts Arizona’s individual income tax rates for tax year 2021 to what they were before Proposition 208 was adopted.

208 effectively created a new top marginal rate of 8 percent, affecting taxpayers with marginal income exceeding $250,000 (single filers) or $500,000 (married filing jointly). Since the surcharge is levied in addition to the general individual income tax rates, Prop. This will significantly mitigate the negative economic impacts of the 3.5 percentage-point income tax surcharge that was narrowly adopted by voters in November 2020. The first change adopted as part of SB 1827, which is effective retroactive to January 1, 2021, is the creation of a cap to prevent the combined top marginal tax rate from exceeding 4.5 percent when the general rates and the Prop. Sources: Tax Foundation state tax statutes, forms, and instructions Bloomberg Tax. The ballot measure that created the surcharge, Proposition 208, takes effect upon proclamation of the governor but is currently being challenged before the Arizona Supreme Court. Unlike Arizona’s general income thresholds, the surcharge threshold ($250,000/$500,000) is not adjusted for inflation.

Rates shown in italics include the 3.5 percentage-point surcharge on marginal income above $250,000 (single filers) or $500,000 (joint filers). Income thresholds are adjusted annually for inflation, but tax year 2021 inflation adjustments were not available as of publication, so inflation-adjusted amounts for tax year 2020 are shown. Note: (*) The rate reductions shown for tax years 20 will take effect either in those years or when revenue triggers are met. The entity-level tax is also explained in further detail.Īrizona FY22 Budget Reduces Income Tax Rates Over Time Arizona’s Individual Income Tax Rate Schedule, Prior Law and New Law The individual income tax rate changes that will take effect over the next few years are shown in the table, with a detailed explanation to follow. (It bears noting, however, that businesses that elect to be taxed at the entity level would not be eligible to claim certain general deductions related to non-business activities.) 208) with another, ultimately resulting in a system in which higher-income business owners can elect to be taxed at a lower rate than non-business owners making the same amount of income. While intended as a way to give businesses-many of which would otherwise be subject to the top individual income tax rate-the benefit of the low 2.5 percent rate that most individual taxpayers will pay under SB 1828, this law attempts to solve one nonneutrality (Prop.

However, another separate bill, SB 1783, also enacted this week, creates an entity-level tax election option for owners of pass-through businesses.

#Az 2022 tax brackets code#

208 imposes a tax surcharge on high earners.) Taken together, these reforms will restore the competitive edge to Arizona’s tax code by reducing individual income taxes for all individuals and non-corporate businesses while significantly improving the state’s tax structure. The most notable changes include a slight adjustment to the interim individual income tax rates, the use of revenue triggers, an increase in the percentage of state individual income tax revenue distributed to localities under the state’s urban revenue sharing program, and further reductions in the commercial property tax assessment ratio.Ī separate bill, SB 1827, also enacted this week, creates a 4.5 percent cap on the top marginal rate when the general rates and the Proposition 208 surcharge are combined. The enacted law kept the basic framework of the original bill intact, but the legislature did make several changes to the bill before it passed both chambers.

Doug Ducey (R) this week signed into law a budget for fiscal year (FY) 2022 that reduces the state’s individual income tax rates and consolidates brackets, a plan that will help restore Arizona’s reputation as a low-tax alternative to California. After weeks of deliberations, Arizona Gov.