What Is the Arizona Families Tax Rebate?
Understand the Arizona Families Tax Rebate, a one-time payment for qualifying taxpayers with dependents based on their 2021 tax information.
The Arizona Families Tax Rebate is a one-time payment authorized by a 2023 bipartisan budget to return a portion of the state’s budget surplus to its residents. This rebate was designed to provide financial relief to taxpayers with dependents. Established under Senate Bill 1734, the program tasked the Arizona Department of Revenue (ADOR) with automatically issuing these funds to qualifying individuals without the need for an application.
Eligibility Requirements for the Rebate
To qualify for the rebate, a taxpayer must have filed a full-year resident Arizona personal income tax return for the 2021 tax year. They also must have claimed the state’s dependent tax credit for at least one dependent on that return. If a joint return was filed, the individual listed first is considered the primary taxpayer.
The final requirement involves a taxpayer’s past tax liability. An individual must have had at least $1 of Arizona personal income tax liability in 2021. If a taxpayer’s credits reduced their 2021 liability to zero, the ADOR would then look back to their 2020 and, if necessary, their 2019 tax returns. To qualify under this lookback provision, the taxpayer must have had at least $1 of tax liability in one of those years and maintained the same filing status as their 2021 return.
Calculating Your Rebate Amount
The total rebate amount is calculated based on the number and age of dependents claimed on the 2021 tax return. A taxpayer receives $250 for each qualifying dependent under age 17 and $100 for each dependent age 17 or older. For example, a family with two dependents under 17 and one who is 17 would receive a total of $600.
The program caps the rebate at a maximum of three dependents, which limits the total possible amount to $750. If more than three dependents were claimed on the 2021 return, the rebate is calculated using the three youngest dependents first.
Receiving Your Payment
The Arizona Department of Revenue automatically distributed the rebate to eligible taxpayers. The distribution method depended on the information the taxpayer had on file with the department, and payments began to be issued in the fall of 2023.
For taxpayers who had provided their bank account information for direct deposit on their 2021 or 2022 Arizona tax return, the rebate was sent electronically. The ADOR scheduled these direct deposits to occur in November 2023.
If the department did not have direct deposit information on file, or if an electronic transfer failed, a paper check was mailed to the last known address on file with the ADOR. The department launched an online portal, familyrebate.aztaxes.gov, where taxpayers could check their eligibility and payment status, and update their mailing address if needed.
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 payment is not subject to Arizona income tax. Taxpayers who receive the rebate are instructed to subtract the amount from their federal adjusted gross income when completing their Arizona state tax return.
At the federal level, the Internal Revenue Service (IRS) determined that the rebate is considered taxable income. To facilitate this, the ADOR issues a Form 1099-MISC to anyone who received a rebate.