As of February 13, 2026, legislation that would align Arizona with recent federal tax changes has stalled in the Legislature and is not expected to pass prior to April 15, 2026. Some taxpayers may not be affected by Arizona’s conformity law but a great many of our clients will be affected.
Some of the tax items that could have the greatest effect on your state tax returns which are still under consideration by the state Legislature include:
| Tax Law Change/Provision | Taxpayers Potentially Impacted |
| Increased bonus depreciation | Partnerships, S corporations, and individual taxpayers with fixed asset additions. |
| Increased limits for Section 179 expense | Business taxpayers with fixed asset additions over $1,220,000. |
| Immediate deduction of 174 expenses | Business taxpayers that have expenses considered research, development, or experimental in nature. |
| Current deduction of business interest expense | Business taxpayers with interest expense in excess of earnings before interest and taxes. |
| Increased state tax deduction | Individual taxpayers who itemize and have state taxes in excess of $10,000. |
The Arizona Department of Revenue has issued the 2025 Arizona income tax forms based on the assumption that conformity would be adopted. Because state law has not yet been updated for conformity, these forms may not ultimately reflect Arizona statute. If your Arizona tax return is filed before the state has enacted any conformity law, there is a possibility that changes in the law or revised state forms could require that your tax return be amended.
If you are an impacted taxpayer, you have two options:
- File before the Arizona Legislature passes legislation, using the forms currently issued. This should be with the understanding that an amendment may be required if the law changes or forms are revised.
- Extend your Arizona return to allow time for legislative action and updated guidance.
We are monitoring developments closely and will advise you if changes occur.
If WP+D prepares your taxes, as we complete your returns, we will reach out to those impacted to discuss options and the best approach for your situation.
Frequently Asked Questions
Why were forms released if the law has not passed?
Arizona begins its tax calculation with federal adjusted gross income. Historically, the Department has issued forms assuming federal changes will be adopted later to keep filing season moving.
What happens if I file now and the law changes?
If conformity legislation passes or the Department revises its forms, you may need to file an amended Arizona return to reflect the final rules. If the Arizona conformity law which is ultimately enacted causes you to owe more in taxes for the year than you do under current law and assumptions, the state may not assess penalties and interest for underpayment of your taxes (A.R.S §43-107), so long as you amend your tax return in a timely manner.
Should I extend instead of filing now?
Extending will eliminate the possibility of needing to amend your tax return later. Although, any tax owed must still be paid by the original due date to avoid penalties and interest.
Will this affect everyone?
Not necessarily, but you should evaluate your tax position with your CPA before you decide to file your Arizona tax return this year.