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ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
income tax; charitable deductions
Purpose
Increases the standard deduction by the amount of charitable deductions that would have been allowed if the taxpayer elected to claim itemized deductions.
Background
For taxable year (TY) 2018, a taxpayer may elect to take a standard deduction as: 1) a single person or a married person filing separately, the standard deduction is $5,312; or 2) a married couple filing a joint return or a single person who is a head of a household, the standard deduction is $10,613.
The standard deduction is in lieu of all itemized deductions, which are to be subtracted from the Arizona adjusted gross income in computing taxable income, but not in lieu of the personal exemption.
The Joint Legislative Budget Committee staff estimates that this bill would result in a state General Fund revenue loss of $(29.4) million in FY 2020. This amount represents an estimate of additional deductions that would be claimed in TY 2019 by two groups: 1) taxpayers who do not currently deduct donations from their state taxes but would not be allowed to do so under H.B. 2359; and 2) current itemizers who may shift to the standard deduction and still take the charitable deduction.
In addition, the Arizona Department of Revenue anticipates incurring administrative costs of $(1.5) million in FY 2020 in order to implement the tax law change (JLBC fiscal note).
Provisions
1. Increases the standard deduction, beginning in TY 2019, by the amount of charitable deductions that would have been allowed if the taxpayer elected to claim itemized deductions rather than the standard deduction.
2. Applies to TYs beginning January 1, 2019.
3. Becomes effective on the general effective date.
House Action
WM 2/6/19 DPA 6-4-0-0
APPROP 2/13/19 DP 6-3-0-2
3rd Read 2/26/19 38-21-1
Prepared by Senate Research
March 25, 2019
CS/kja