Arizona's state income tax rates are relatively low, but the state taxes higher incomes at higher rates. To do this, it employs a progressive system of marginal tax brackets, which provide for higher tax rates on income that exceeds statutory thresholds.
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Figure out Your Arizona State Income Tax
Have your W-2 earnings statement, supplied by your employer, on hand when you sit down to calculate your Arizona state income tax. If you're self-employed or the owner of a business, you'll determine your income from the ledger and other records you keep. Be accurate and honest.
Add up all the income you have received throughout the year from all sources--work, capital gains, investments, inheritances, prizes, grants and bursaries.
Total the tax deductions for which you qualify. Everyone enjoys a basic federal deduction, but you may qualify for others, depending on your situation. This is particularly true of business owners and supporters of dependents.
Subtract the total amount of your tax deductions from your annual income. The remainder is your taxable income.
Determine your marginal tax rate. The lowest individual tax rate, applicable to taxable incomes of $10,000 and lower, is 2.59 percent. For higher incomes, marginal tax rates
apply as follow: for incomes from $10,001 to $25,000, the marginal rate is 2.88 percent; for incomes from $25,001 to $50,000, the marginal rate is 3.36 percent; for incomes from $50,001 to $150,000, the marginal rate is 4.24 percent, and taxable income in excess of $150,000 is subject to a 4.54 percent tax. Matginal tax rates apply only to a portion of your income - the 3.36 percent rate, for instance, applies only to that portion of your income from $50,001 to $150,000.
Calculate your tax by first determining your marginal tax rate. If your taxable income is $10,000, for instance, your tax rate is 2.59 percent, and you'd owe $259. If your income is $15,000, your marginal tax rate is 2.88 percent. That means your tax is 2.59 percent of the first $10,000 ($259) plus 2.88 percent of the next $5,000 ($144), or $403. If your taxable income is exactly $25,000, your tax is $691, which is 2.59 percent of $10,000 plus 2.88 percent of $15,000. If your taxable income is $33,000, your marginal tax rate is 3.36 percent, which means you'd pay 3.36 percent of $8,000 - the amount your income exceeds $25,000 - PLUS $691, the tax on $25,000, for a total of $959.80.