Arizona state basis is Federal Adjusted Gross Income (AGI). So you must prepare your federal income taxes first and carryforwar the Federal AGI to your state tax form. This amount is adjusted for the state income additions, tax deductions, tax credits and state exemptions to figure out the state taxable income. Arizsona follow the Joint filing system for married filing joint taxpayers. You can find below the major differences between the tax treatement of various taxes by Fedeal and Arizona State Taxes.

Interest/Divident Income: Interest and Divident income from U.S. government bonds are exempt from State Taxes.

Rent Income: The state taxes on rental income is in line with federal taxes.

Capital Gain: The Capital Gains are treated similar to Federal Taxes for State Taxes.

Unemployment Income: Same as federal

Social Security Benefits: All social security income is exempt from state taxes.

State Bond Interest: Taxable except Arizona obligations

Health Savings Accounts: Same as federal.

Disability: Same as federal.

Lottery: Up to $5,000 from Arizona lottery excluded.

Federal Income Tax: Not deductible.

Other Taxes: Deductions for crops contributed to charitable organizations, distributions from a qualified state tuition program included in federal AGI, deposits and employer contributions to MSAs, up to $3,000 in adoption expenses, up to $5,000 for an energy efficient residence, and up to $500 for a qualified wood stove, wood fireplace, or gas-fired fireplace. In addition, deductions for amounts claimed for the following federal credits: work opportunity; empowerment zone employment; Indian employment; and employer-paid social security on cash tips.

Check other state tax links below.