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ARIZONA STATE SENATE
Fifty-Seventh Legislature, First Regular Session
income tax; subtraction; adoption expenses
Purpose
Increases, for taxable years beginning January 1, 2026, the individual income tax subtraction for unreimbursed adoption expenses from $3,000 to $5,000 for a single individual or head of household and $10,000 for a married couple filing jointly or separately.
Background
Individual income tax is levied on Arizona residents’ taxable income. The tax base begins with Arizona gross income, which is equivalent to the taxpayer's federal adjusted gross income. Statute authorizes various amounts to be added or subtracted when computing an individual's Arizona adjusted gross income, which is further reduced by standard or itemized deductions to arrive at Arizona taxable 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. § 43-1022).
The Joint Legislative Budget Committee fiscal note estimates that H.B. 2155 would result in an annual state General Fund cost of $40,000 beginning in FY 2027 (JLBC Fiscal Note).
Provisions
1. Increases, for taxable years beginning January 1, 2026, the individual income tax subtraction for unreimbursed adoption expenses from $3,000 to:
a) $5,000 for a single individual or head of household; or
b) $10,000 for a married couple filing a joint return.
2. Specifies that, in the case of a husband and wife who file separate returns, the subtraction may be taken by either taxpayer or divided between the taxpayers, but the total subtractions allowed may not exceed $10,000.
3. Makes technical changes.
4. Becomes effective on the general effective date.
House Action
WM 1/29/25 DP 5-3-1-0
3rd Read 2/12/25 40-19-1
Prepared by Senate Research
February 26, 2025
MG/AL/ci