If enacted, this bill would amend section 43-1022 of the Arizona Revised Statutes to introduce a new individual income tax subtraction for tips received by employees. Specifically, for taxable years beginning January 1, 2025, individuals would be allowed to subtract compensation received as tips during the taxable year, provided these tips are reported to the employer and are not already excluded from Arizona gross income under the Internal Revenue Code. This change aims to provide tax relief for employees who rely on tips as part of their income.

The bill would not alter the existing provisions of the statute but would add this new language regarding the treatment of tips for tax purposes. The current law remains unchanged, but the insertion of this new provision would create a specific allowance for tip compensation, potentially reducing state General Fund revenues by an estimated $31 million annually starting in FY 2026.

Statutes affected:
Introduced Version: 43-1022
House Engrossed Version: 43-1022