Does Arizona tax tips and overtime?

Arizona starts from federal AGI (A.R.S. §43-1001), so below-the-line §224 could not flow through automatically and required affirmative legislation. HB 4168, signed by Gov. Hobbs on June 13, 2026, updated Arizona's IRC conformity date to January 1, 2026 AND added an express subtraction from Arizona gross income for 'the amount of qualified tips received during the TY that is deducted under Section 224 of the IRC,' effective retroactively for taxable years beginning January 1, 2025. Backstory: Executive Order 2025-15 (Nov 2025) had ADOR place tips/overtime subtractions on the 2025 forms with no statute behind them; Hobbs vetoed SB 1106 and HB 2785 before HB 4168 supplied the statutory basis retroactively, so 2025 filers who claimed the subtraction do not need to amend.

Same vehicle: HB 4168 adds a subtraction from Arizona gross income for 'the amount of qualified overtime compensation received during the TY that is deducted under Section 225 of the IRC,' to the extent not already excluded from federal AGI, retroactive to taxable years beginning January 1, 2025. The subtraction tracks the federal amount actually deducted, so the federal $12,500/$25,000 caps and MAGI phase-out effectively carry over; Arizona imposes no separate cap.