Arizona no tax on tips calculator and $3.00 tip credit
Arizona is one of the few states that pass the federal tips deduction straight through for 2025 and 2026: A.R.S. § 43-1022 subtracts the amount you deducted under section 224 before the 2.5% state rate applies.
How Arizona got there
The 2025 forms came first. Governor Hobbs’ Executive Order 2025-15 told the Department of Revenue to put a qualified-tip subtraction on the 2025 Form 140, and the subtraction now sits in A.R.S. § 43-1022 for taxable years beginning after December 31, 2024. The subtraction is on the long Form 140 only — Arizonans who usually file the 140A or 140EZ must switch forms to claim it.
The amount is whatever you actually deducted federally, after the $25,000 cap and the income phase-out, so Arizona never allows more than the IRS does.
Arizona figures
| Cash wage / minimum | $12.15 / $15.15 |
|---|---|
| In force | July 1, 2026 – December 31, 2026 |
| Next change | after December 31, 2026 — not yet published |
| Tipped threshold | Not specified in state law |
| Tips on the 2025 return | state allows the federal tips amount. A.R.S. § 43-1022 subtracts “the amount of qualified tips received during the taxable year that is deducted under section 224 of the internal revenue code” for taxable years after Dec. 31, 2024. Source: Arizona Legislature |
| Tips on the 2026 return | state allows the federal tips amount. The same subtraction applies; the statute has no end date of its own, but the federal deduction it mirrors ends after 2028. Source: Arizona Legislature |
Arizona’s tipped wage
Arizona caps the tip credit at a flat $3.00 rather than a percentage, so the cash wage climbs with every inflation adjustment: $12.15 against a $15.15 minimum in 2026. The Industrial Commission publishes the next year’s rate in the fall; the 2027 figure was not out on our verification date, so the calculator asks for it once 2027 arrives.
A Scottsdale server who files Form 140
With $22,000 of tips and $31,000 of other wages, the federal deduction is $22,000, saving $2,640. The same $22,000 comes off Arizona income at 2.5%, saving about $550 more — $3,190 in all. At a $12.15 cash wage, 32 hours already pay $389, so tips easily clear the minimum and no make-up is owed.
Test an Arizona workweek
Where these figures come from
- Arizona Department of Revenue · Industrial Commission of Arizona, Labor Department
- A.R.S. § 43-1022, Subtractions from Arizona gross income (2026)
- 2025 Arizona Form 140 instructions (2025)
- Minimum Wages for Tipped Employees (table by state) (2026-07-01)
Federal rules: how the deduction works. Nearby: California, Nevada, Utah, New Mexico, Colorado.
Figures verified against primary sources on