AZ HB2433

Amends Arizona Revised Statutes section 43-1022 to create a new subtraction for retired or retainer pay of uniformed services of the United States, removing it from the existing $2,500 pension subtraction cap.

Allows veterans, activated reservists, and National Guard members who served on active duty in a combat zone during war or hostilities and were honorably discharged to subtract the full amount of military retirement pay from Arizona taxable income.

Limits non-combat veterans to a subtraction of up to $5,000 of military retirement pay per taxable year.

Requires veterans claiming the full subtraction to maintain written documentation from the Arizona Department of Veterans' Services, U.S. Department of Veterans Affairs, or U.S. Department of Defense proving combat service and honorable discharge.

Applies retroactively to taxable years beginning January 1, 2017 and later.