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ARIZONA STATE SENATE
Fifty-Sixth Legislature, First Regular Session
income tax; subtraction; adoption fees
Purpose
Effective January 1, 2024, increases from, $3,000 to $40,000, the amount of the individual income tax subtraction for unreimbursed adoption expenses.
Background
Individual income tax is levied at a single tax rate of 2.5 percent on the personal income of full-time residents and prorated for part-time residents of Arizona. The starting point for Arizona individual income tax is the federal adjusted gross income. To determine an individual's Arizona adjusted gross income, Arizona gross income is statutorily adjusted by additions and subtractions of certain expenses and income. An individual must subtract up to $3,000 of unreimbursed medical and hospital costs, adoption counseling, legal and agency fees and other nonrecurring costs of adoption. The subtraction may include costs incurred in prior years but may only be taken in the year in which the final adoption order is granted (A.R.S. §§ 43-1021; 43-1022; and 43-1011; Version 2).
The Department
of Child Safety (DCS) oversees all adoptions in Arizona and reports
semi-annually on its program and outcomes data regarding child welfare. In FY
2022, DCS reported the occurrence of 2,638 adoptions in Arizona (A.R.S.
§ 8-526; DCS).
If increasing the income tax subtraction for unreimbursed adoption expenses results in a change in individual income tax collections, there may be a fiscal impact to the state General Fund.
Provisions
1. Increases, from $3,000 to $40,000, the amount of the individual income tax subtraction for unreimbursed adoption expenses.
2. Becomes effective on January 1, 2024.
Prepared by Senate Research
February 9, 2023
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