AZ SB1444

Adds a new subtraction from Arizona gross income for military retirement pay (uniformed services retired or retainer pay) with a phased increase in the exemption amount from $12,500 (2018-2019) to full exclusion by 2021.

For taxable years 2018-2019, allows subtraction of up to $12,500 in military retirement benefits; increases to $25,000 for 2019-2020.

For taxable years 2020-2021, allows subtraction of 75% of military retirement pay or $25,000, whichever is greater; thereafter allows full subtraction of all military retirement benefits received.

Removes military retirement pay from the existing $2,500 cap on federal and military pension benefits under section 43-1022, paragraph 2(a).

Effective for taxable years beginning January 1, 2019 and thereafter.