What Is the Arizona Families Tax Rebate?
A guide to the one-time Arizona Families Tax Rebate, explaining how payments for taxpayers with dependents are determined based on prior state tax returns.
The Arizona Families Tax Rebate is a one-time payment distributed to eligible Arizona taxpayers. This rebate originated from the state’s 2023 bipartisan budget, which allocated funds from a significant surplus to provide financial relief to families. Authorized under Senate Bill 1734, the program was designed to return money to taxpayers with dependents, acknowledging their contributions to the state’s economy.
Eligibility Requirements for the Rebate
To qualify for the Arizona Families Tax Rebate, a taxpayer must meet several specific conditions tied to their past tax filings. The primary requirement is that the individual must have filed a full-year Arizona resident personal income tax return for the 2021 tax year. For those who filed as married filing jointly, the rebate is directed to the primary or first-listed taxpayer on that 2021 return.
A second condition for eligibility involves the taxpayer’s history of tax liability. An individual must have had at least $1 of Arizona individual income tax in 2021. If a taxpayer had no tax liability in 2021, they could still qualify if they had at least $1 of tax liability in either the 2020 or 2019 tax years, provided the filing status on those returns was the same as their 2021 return. Tax liability, in this context, refers to the amount of tax owed to the state before any payments or credits are applied.
The final requirement centers on dependents. A taxpayer must have claimed the Arizona dependent tax credit on their 2021 return for at least one dependent. The rebate program recognizes two categories of dependents for this purpose. The first category includes dependents under the age of 17, and the second includes dependents who are age 17 or older.
Calculating Your Rebate Amount
For each qualifying dependent who was under the age of 17, a taxpayer receives $250. For each qualifying dependent who was age 17 or older, the amount is $100.
There is a cap on the total rebate amount a taxpayer can receive. The maximum rebate is $750 for taxpayers with a filing status of single, head of household, or married filing separately. For taxpayers who file as married filing jointly, the maximum rebate is $1,500. For example, a family with two dependents under 17 would calculate their rebate as $250 + $250, for a total of $500.
Receiving the Rebate Payment
The Arizona Department of Revenue (ADOR) issued the rebate payments between October 15, 2023, and November 15, 2023. The method of delivery was determined by the information ADOR had on file from recent tax returns. Taxpayers who provided bank account details for direct deposit on either their 2022 or 2021 Arizona tax returns received their rebate electronically.
For taxpayers who did not provide direct deposit information, a paper check was mailed. These checks were sent to the last known address on file with the ADOR. The ADOR provided an online portal at familyrebate.aztaxes.gov where taxpayers could check their eligibility and the status of their rebate.
Tax Implications of the Rebate
The tax treatment of the Arizona Families Tax Rebate differs at the state and federal levels. For state purposes, the rebate is not subject to Arizona income tax. It should be subtracted from the federal adjusted gross income when completing the state return.
On the federal level, the Internal Revenue Service (IRS) has classified the rebate as taxable federal income. The state of Arizona is in a legal dispute with the IRS over this decision, arguing that the rebate should be non-taxable. Consequently, the ADOR issues a Form 1099-MISC to taxpayers who received the rebate, reporting the payment to both the individual and the IRS. Due to this ongoing dispute, taxpayers should consult the latest IRS guidance or a tax professional for their specific circumstances.