AZ SB1203

Increases Arizona's standard deduction for tax years beginning after December 31, 2024: single filers from $12,200 to $15,750, heads of household from $18,350 to $23,625, and married couples filing jointly from $24,400 to $31,500.

Creates new income tax subtractions for taxable years 2025-2028 matching federal deductions for: enhanced senior deductions under IRC Section 151(d)(5)(C), qualified tips under IRC Section 224, and qualified overtime compensation under IRC Section 225.

Increases the subtraction limit for unreimbursed adoption costs from $3,000 to $5,000 for single filers/heads of household and $10,000 for married couples filing jointly, effective for tax years beginning after December 31, 2025.

Requires the Arizona Department of Revenue to annually adjust the new standard deduction amounts for inflation using the same methodology as federal basic standard deduction adjustments.

Applies retroactively to taxable years beginning from and after December 31, 2024.