The state of Arizona has released new AZ income tax withholding options to go in effect on January 1st, 2023. The new form (known as the A-4) will now offer 7 withholding options, including a 0% option and an additional line to write in specific dollar amount elections.
This update to the A-4 is due to the passage of Senate Bill 1828, by Arizona Legislation in 2021, substantially reducing the Arizona income tax rates starting in the 2022 tax year. In the 2022 tax year, there were two individual tax rates, 2.55%, and 2.98%, depending on your taxable income. Starting in 2023 there will be a new flat income tax rate of 2.5%
If you do not make a new tax election using the updated form, employers are instructed to select the default rate of 2.0%.
Please keep in mind, there are many factors in determining the total tax you may owe the state of Arizona come tax season. Please consult with your local tax advisor to help determine the proper withholding you should select.
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