Arizona · 2027 and beyond

Arizona in 2027 and beyond: what is already law, and what is still open

Proposition 316 passed: city grocery taxes are capped at 2%. The 2.5% income tax is unchanged for 2026 and 2027. What is on the 2026 return, what starts with tax year 2027, and what is scheduled or conditional after that.

By Charles Trautman, EA, editor

Need to Know Tax · written from Arizona Department of Revenue sources and the unofficial November 3 election returns, November 12, 2026 · not yet reviewed by an Arizona practitioner

Proposition 316 passed: city grocery taxes are capped at 2%. The 2.5% income tax is unchanged for 2026 and 2027. This page keeps apart three things that get mixed together in the news: what is on the 2026 return you file in early 2027, what begins with tax year 2027, and what is scheduled, conditional or still undecided after that. Election figures are the unofficial November 3, 2026 returns and are not final until the state certifies them.

What the voters decided on November 3, 2026

Arizona tax measures, November 3, 2026
Measure	Result	What it does
Proposition 316	Passed	Caps any city or town sales tax on groceries at 2% and requires a local vote to impose or raise one; no new or higher local grocery tax between July 1, 2025 and June 30, 2027. About 61% yes.
Proposition 141	Passed	Bars any state or local tax or fee based on vehicle miles traveled.

Unofficial returns. Results become final when the state certifies them, usually by early December.

This return, next year, and later

Arizona: what applies when
When	What applies
The 2026 return, filed in early 2027	The rate is a flat 2.5%.
	Arizona subtracts the federal deductions for tips, overtime and seniors 65 and over, made law by HB 4168 (signed June 13, 2026), retroactive to 2025.
	The car-loan interest subtraction ended after 2025.
	Itemized state and local taxes are capped at $10,000 whatever the federal return allows.
	The charitable add-on for standard-deduction filers is 100% of gifts up to $1,000 single or $2,000 joint.
Starting with tax year 2027	The rate stays at 2.5%.
	From the 2027 tax year the property tax exemption for disabled veterans has no income limit and reaches veterans rated totally disabled on individual unemployability.
	From July 1, 2027 a city may tax groceries only with voter approval and at no more than 2%.
2028 and later, or conditional	The tips, overtime and senior subtractions end when the federal deductions end, after 2028.

Items under 2027 and later do not change the 2026 return. They matter for 2027 withholding, estimated payments and planning. The detail behind each line is in the other Arizona articles.

The 2025 federal law and the Arizona return

Arizona conforms to the Internal Revenue Code as of a fixed date, and the Legislature votes each year to move it. For the 2025 federal law it went further than most states and gave its own subtractions for tips, overtime and the senior deduction.

That is the reason a change on the federal return, such as the deductions for tips, overtime and people 65 and older, may or may not show up on the Arizona return. The federal side is in The new deductions for tips, overtime and seniors.

What to watch

The 2027 conformity bill, and the 2026 standard deduction figures when the Department publishes them. When something on this page changes, the change is logged on the updates page with its date.

What to bring

Your 2026 federal and Arizona returns, once filed, to set 2027 withholding and estimated payments against them
Your last pay stub of 2026 and the first of 2027, to see whether withholding changed
Any notice from the state about a 2027 rate, credit or filing change

Questions people ask

Does anything here change the Arizona return I file in early 2027?

Only what is listed under the 2026 return. Everything listed under 2027 or later affects withholding, estimated payments and planning, not the return for 2026.

Are the election results final?

Not yet. The figures on this page are the unofficial returns. The state certifies results in the weeks after the election, and this page will be corrected if anything changes.

How will I know if this page changes?

Every change is logged on the updates page with its date and the article it affects. State legislatures meet in early 2027 and some act before the filing deadline.

Arizona, after the election

Proposition 316 passed: city grocery taxes are capped at 2%. The 2.5% income tax is unchanged for 2026 and 2027.

Written by Charles Trautman, EA, editor  ·  Need to Know Tax, Lone Tree, Colorado
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Sources and where to check

Written November 12, 2026 · after the November 3 election · awaiting review by an Arizona practitioner