What Is the Arizona Tax Rebate and Who Gets It?

As part of the 2023 state budget, Arizona authorized a one-time payment known as the Arizona Families Tax Rebate. This initiative, established by law and signed by the governor, was created to return a portion of the state’s budget surplus to residents. The program’s objective was to offer financial relief to families with dependents by distributing funds from an allocation of approximately $260 million. The Arizona Department of Revenue (ADOR) was tasked with automatically issuing these payments to taxpayers who met specific criteria.

Eligibility Requirements

To receive the rebate, a taxpayer had to meet several conditions based on past tax filings. The foundational requirement was the submission of a full-year Arizona resident personal income tax return for the 2021 tax year. On that return, the taxpayer must have claimed the Arizona dependent tax credit for at least one individual.

Another condition related to the taxpayer’s filing status and tax history. For those who filed as single, head of household, or married filing separately, they had to be the sole taxpayer on the return. If a married filing jointly return was submitted, the rebate was directed to the primary or first-listed taxpayer on that 2021 return.

The final eligibility point centered on a taxpayer’s tax liability to the state. A taxpayer needed to have at least $1 of Arizona personal income tax liability in 2021. The law included a lookback provision for those with no liability that year. If a taxpayer had no liability in 2021, the ADOR reviewed their 2020 and 2019 returns; having at least $1 of tax liability in either of those years, while maintaining the same filing status as in 2021, satisfied this requirement.

Calculating Your Rebate Amount

The rebate amount was directly tied to the dependents claimed on the 2021 tax return, with a two-tiered system based on age. For each qualifying dependent under the age of 17, the rebate amount was $250, and for each dependent aged 17 and over, the amount was $100. For instance, a family with two dependents, ages 10 and 15, would have received a rebate of $500, while a family with one dependent aged 18 would have received $100.

The program also capped the number of dependents that could be factored into the calculation. A taxpayer could only claim a maximum of three dependents for this rebate, which limited the maximum possible rebate to $750. If a taxpayer claimed more than three dependents, the rebate was calculated using the three youngest individuals.

The Distribution Process

The Arizona Department of Revenue began automatically distributing the rebate in the fall of 2023, with no action required from most eligible taxpayers. The method of payment was determined by information on file from recent tax filings. Taxpayers who provided bank account details for direct deposit on their 2021 or 2022 Arizona tax returns received the rebate electronically.

For all other qualifying taxpayers where direct deposit information was not available, the ADOR issued a paper check. These checks were mailed to the last known address on file with the department.

The ADOR launched a dedicated online portal, familyrebate.aztaxes.gov, which remains active. Through this site, individuals can check their rebate status, update their mailing address, or file a claim if they believe they were eligible but did not receive a payment.

Taxability of the Rebate

The tax treatment of the Arizona Families Tax Rebate differs between state and federal levels. For Arizona state tax purposes, the rebate is not considered taxable income. Recipients should subtract the rebate amount from their federal adjusted gross income when completing a state tax return.

From a federal perspective, the Internal Revenue Service (IRS) determined the rebate is subject to federal income tax. The Arizona Department of Revenue issued a Form 1099-MISC for the 2023 tax year to facilitate reporting. This income should have been reported on 2023 federal tax returns.