AZ State Tax Instructions for Part Year Residents

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If your plans this year include moving into or out of the state of Arizona, you should learn a few things about the state's tax law. The first year tax return is the trickiest part as you will be a resident of two states during the year. Like many states, Arizona requires some special treatment for its part-year residents; knowing the rules will help ease your transition.

Residency Requirements

  • Prior to filing an Arizona state tax return, you must determine your residency within the state.

    Arizona considers you a resident of the state if "your domicile is in Arizona." The state defines domicile as the "place where you have your permanent home." Leaving the state to work will not change your residency as long as you remain domiciled in Arizona.

    You are considered a part-year resident if you leave the state with the plan of moving permanently or move into the state with the plan of taking up residency in Arizona. Either case will deem you a part-year resident in the state of Arizona.

What Income is Taxable in Arizona?

  • Income earned, even out of state, by a resident of the state is taxable by Arizona. This rule applies to full-year residents as well as part-year residents.

    For an Arizona part-year resident any income earned from an Arizona source, even after you have moved, is taxable. In addition, all income while living as a resident in Arizona including any interest and dividends you may have earned is also taxable. This includes interest and dividends from sources in other states.

Filing Requirements

  • A part-year resident is required to file a form 140PY with the Arizona Department of Revenue by the filing date. You are required to determine a percentage of income from other states, so it is best to have your federal and other state returns prepared prior to starting the Arizona return. According to Jeremy Slaughter MAcc, EA, "if you are working on the return manually, having the federal return completed first will give you most of the information needed to prepare the states." You simply determine which income and deductions apply to which state from there.

    Gathering information for two or more states can leave you in a time crunch prior to the required filing date. For most people this date is April 15 of each year. Arizona will allow a 6-month extension of time to file by filing either Arizona form 204 or you may use the federal form 4868. If the federal extension is used the taxpayer is not required to attach this form to their Arizona return as long as it is filed at the same time as the federal tax return.

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