Arizona taxpayers are filing 2025 state income tax returns while lawmakers continue debating how Arizona should conform its tax code to recent federal changes. The Arizona Department of Revenue opened filing on January 27, but the forms were prepared in advance and may require revisions if new conformity legislation is enacted.
Republican lawmakers advanced SB 1106 in mid January to align Arizona law with federal provisions. Governor Katie Hobbs vetoed the bill on January 16. A separate proposal supported by Hobbs, HB 2531, has not been assigned to a committee by Republican leadership.
Two Competing Tax Proposals
Both SB 1106 and HB 2531 would increase Arizona’s standard deduction from $15,750 to $31,500, reflecting the federal standard deduction increase enacted under President Trump’s One Big Beautiful Bill (H.R. 1) signed in late 2025. The bills differ on other deductions and credits.
SB 1106 Provisions
SB 1106 adopts most federal tax changes and adds Arizona specific provisions. The bill creates a $6,000 deduction for pension or retirement account distributions for taxpayers age 60 and older. It adds a separate $6,000 deduction for Roth IRA contributions. It increases the dependent tax credit from $100 to $125 for children under age 17. It also permanently codifies state deductions for tips and overtime compensation.
SB 1106 does not include several federal provisions, including the additional $6,000 deduction for seniors age 65 and older, the increase in the state and local tax deduction cap from $10,000 to $40,000, and the deduction for interest on new car auto loans.
HB 2531 Provisions
HB 2531, backed by Hobbs and Democrats, includes the $6,000 senior deduction that SB 1106 omits. It adds deductions for tips and overtime but sunsets those deductions after 2028 rather than making them permanent. It does not include the retirement distribution deduction or the Roth IRA contribution deduction included in SB 1106.
The Joint Legislative Budget Committee estimated HB 2531 would reduce Arizona’s general fund by $757 million over four years. SB 1106 was estimated to reduce revenue by $1.44 billion over four years, including $441 million in fiscal year 2026.
Conformity Timing And Form Preparation
Arizona typically updates conformity legislation by November or December to align with federal changes. That timeline allows the revenue department to print materials and coordinate with online tax preparation services.
Republicans criticized Hobbs for not calling a special session in November 2025 to address conformity. Democrats objected to provisions in SB 1106, saying the bill would provide greater benefits to corporations and higher income taxpayers.
Representative Justin Mesnard, a Republican, told colleagues that taxpayers who file before legislative changes could need to amend returns later. Representative David Livingston, a Republican from Peoria, criticized the lack of agreement on the state’s approach to conformity.
House Appropriations Chair Ben Olson said the state’s $17.5 billion budget could absorb the revenue impact. He said the changes would help taxpayers manage household costs.
The Arizona Department of Revenue prepared forms based on full federal conformity combined with provisions aligned with Hobbs’ policy priorities. Agency officials said the forms do not match either SB 1106 or HB 2531, and that filers may need to amend returns depending on what legislation is ultimately enacted.
Filing, Amendments, And Deadlines
If Arizona enacts conformity changes after returns are filed, taxpayers may need to submit amended returns. Amendments can generally be filed within three years and can be submitted by mail after October 15.
The deadline to file and pay 2025 Arizona income taxes is April 15, 2026 for most filers. An extension would move the filing deadline to October 15, 2026, but does not extend the payment deadline.
The two proposals treat some taxpayer groups differently. Under SB 1106, the $6,000 retirement distribution deduction would apply beginning at age 60. Under HB 2531, the $6,000 senior deduction would apply beginning at age 65. Roth IRA contributions would be deductible under SB 1106 but would not be deductible under HB 2531.
Legislative Outlook
Republican lawmakers have not said whether they will seek to override Hobbs’ veto of SB 1106, which would require two thirds support in both legislative chambers. HB 2531 remains without a committee assignment.
Arizona’s budget cycle typically runs from April through June, which could affect when lawmakers address conformity.
The Arizona Department of Revenue continues processing returns under current law and related executive guidance. Agency officials said the forms may need updates if new conformity legislation is enacted.