Why Arizonans should wait to file their taxes
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Illustration: Sarah Grillo/Axios
Tax season kicks off this week, but a political fight at the state Legislature may complicate matters for Arizonans looking to get a jump on filing.
The big picture: Democratic Gov. Katie Hobbs and the Republican-controlled Legislature have yet to reach an agreement on state tax conformity.
- What is often a humdrum annual process to bring the state in line with federal tax changes is more complicated this year, with Republicans pushing for steeper tax cuts than Hobbs is willing to support.
Why it matters: Arizonans who submit their taxes before a compromise is reached run the risk of needing to refile when new rules are adopted.
Catch up quick: Legislative Republicans promptly sent Hobbs their tax bill during the first week of session. Hobbs then vetoed it.
State of play: Senate President Warren Petersen (R-Gilbert) and House Speaker Steve Montenegro (R-Goodyear) sent Hobbs a letter last Friday asking for "clarity" on her desired tax conformity plan.
- "Your veto message signaled a desire for a different approach, but it did not specify what that approach is," the letter said.
- Senate GOP spokesperson Kim Quintero told Axios that the governor has not yet responded to the letter.
- Democratic legislative leaders sponsored bills to enact the governor's tax plan, Hobbs spokesperson Christian Slater told Axios, saying GOP lawmakers should pass the proposal now and the two sides can discuss other tax conformity issues during budget negotiations later in the legislative session.
Friction point: Both sides are calling for tax cuts. The disagreement lies in who should receive relief and how much.
- State GOP leaders want to mirror most of the federal tax cuts from last year's One Big Beautiful Bill Act, which include business tax breaks, an increase in the state's per-child tax credit, and deductions for child care, pensions and retirement investment programs.
- Hobbs seeks to increase the standard deduction, exempt tips and overtime pay, and add a new deduction for seniors.
Between the lines: About 88% of Arizonans take the standard deduction, according to the Hobbs administration.
Follow the money: Hobbs' plan is projected to cost $250 million, whereas the Republican measure is projected to run $440 million.
Zoom out: Several major federal tax changes may affect Arizona filers this year, including:
- Increasing standard deductions by $750 per filer for single and married people and $1,125 for heads of household.
- A new $6,000 federal tax deduction for Americans 65 and older.
- New deductions for tips and overtime pay.
- A $200 increase to the child tax credit.
The bottom line: Larger refunds are likely this tax season, but Arizonans would be wise to wait for a resolution at the state Capitol before filing their returns.