What is the Arizona PTET rate?

Arizona's PTET rate is 2.50% flat. 2.5% for tax year 2025 (flat AZ individual rate per § 43-1011). 2026 rate assumed to remain 2.5% absent legislative change; verify with azdor.gov before publication.

Is the Arizona owner credit refundable?

Arizona's PTET owner credit is refundable. [PLACEHOLDER: state DOR cite] — Form 355 (Credit for Entity-Level Income Tax Paid) referenced but credit type not pinned.

Does Arizona PTET affect composite-return filing?

Stacks. See the composite-vs-PTET page for the full matrix.

Arizona · AZ

Arizona Pass-Through Entity Tax (PTET)

Arizona's PTET regime is one of the 37+ state workarounds to the federal SALT cap (IRC §164(b)(6)). The election is annual, statute-pinned below, and interacts with composite filing and §199A QBI in state-specific ways.

Statute: A.R.S. § 43-1014 (PTE election); rate tied to § 43-1011
State DOR portal: https://azdor.gov/forms/corporate-tax-forms/corporate-and-pass-through-entity-estimated-tax-payment
Election deadline: [PLACEHOLDER: state DOR cite] — Pub 713 should be re-fetched to pin precise 2026 election deadline.
Election form: Form 165 PTE (Arizona Partnership Income Tax Return with PTE election); Form 120S for S corps
Entity-level rate: 2.50% — 2.5% for tax year 2025 (flat AZ individual rate per § 43-1011). 2026 rate assumed to remain 2.5% absent legislative change; verify with azdor.gov before publication.
Eligible entities: s-corp, partnership, llc-as-s, llc-as-partnership
Owner credit: refundable — [PLACEHOLDER: state DOR cite] — Form 355 (Credit for Entity-Level Income Tax Paid) referenced but credit type not pinned.
Composite interaction: stacks
§199A QBI base reduction: Yes — Reduces federal flow-through income (Notice 2020-75).
Last verified: 2026-05-11

Source: azdor.gov Pub 713 + 2025 120PTE-W instructions. Multiple specifics flagged as PLACEHOLDER pending deeper fetch.

IRC §164(b)(6)Notice 2020-75 IRC §199A

Reference computation

For a Arizona pass-through entity with $500,000 of qualified net income allocated to this state, at a 37% federal marginal bracket, the entity-level PTET and federal-deduction math is:

Arizona — reference example

QBI allocation·AZ rate= Entity-level tax

$500,000×3%=$12,500

A.R.S. § 43-1014 (PTE election); rate tied to § 43-1011

Entity tax·Federal bracket= Federal deduction (gross)

$12,500×37%=$4,625

At a 37% federal bracket, the entity-level deduction saves $4,625 in federal tax. Net of §199A QBI offset (~20% × bracket × entity tax = $925), aggregate benefit is approximately $3,700.

IRS Notice 2020-75

Run the picker pre-filled for Arizona

Election walkthrough

Verify eligibility. Arizona accepts: s-corp, partnership, llc-as-s, llc-as-partnership.
Check the deadline. [PLACEHOLDER: state DOR cite] — Pub 713 should be re-fetched to pin precise 2026 election deadline. Entities with prior-year AZ taxable income exceeding $150,000 must make estimated payments (Form 120/PTE-W).
Compute the entity-level tax. Apply the 2.50% rate to qualified net income.
Pay and file. Use Form 165 PTE (Arizona Partnership Income Tax Return with PTE election); Form 120S for S corps. Quarterly estimates may be required.
Owners claim the state credit. refundable credit on the personal state return.
Verify composite interaction. Composite interaction: stacks. See composite vs PTET.
Run the federal §199A QBI math. PTET reduces the QBI base proportionally; net the federal SALT-arbitrage against the §199A offset.

Arizona PTET — common questions

Annual deadline reminder

State PTET law revises annually. Arizona's data was last verified on 2026-05-11. Re-confirm with the state DOR primary source before electing or filing. Last full-site review: 2026-05-12.

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Reference computation

For a Arizona pass-through entity with $500,000 of qualified net income allocated to this state, at a 37% federal marginal bracket, the entity-level PTET and federal-deduction math is:

Arizona — reference example

QBI allocation·AZ rate= Entity-level tax

$500,000×3%=$12,500

A.R.S. § 43-1014 (PTE election); rate tied to § 43-1011

Entity tax·Federal bracket= Federal deduction (gross)

$12,500×37%=$4,625

At a 37% federal bracket, the entity-level deduction saves $4,625 in federal tax. Net of §199A QBI offset (~20% × bracket × entity tax = $925), aggregate benefit is approximately $3,700.

IRS Notice 2020-75

Election walkthrough

Verify eligibility. Arizona accepts: s-corp, partnership, llc-as-s, llc-as-partnership.

Check the deadline. [PLACEHOLDER: state DOR cite] — Pub 713 should be re-fetched to pin precise 2026 election deadline. Entities with prior-year AZ taxable income exceeding $150,000 must make estimated payments (Form 120/PTE-W).

Compute the entity-level tax. Apply the 2.50% rate to qualified net income.

Pay and file. Use Form 165 PTE (Arizona Partnership Income Tax Return with PTE election); Form 120S for S corps. Quarterly estimates may be required.

Owners claim the state credit. refundable credit on the personal state return.

Verify composite interaction. Composite interaction: stacks. See composite vs PTET.

Run the federal §199A QBI math. PTET reduces the QBI base proportionally; net the federal SALT-arbitrage against the §199A offset.

Arizona PTET — common questions