Governor Katie Hobbs Signs Executive Order Taking Steps to Cut Taxes for Middle Class Arizonans

Middle Class Tax Cuts Package to Increase Standard Deduction, Cut Taxes for Seniors and on Tips, Overtime

Phoenix, AZ - Today, Governor Katie Hobbs signed Executive Order 2025-15 Cutting Taxes for Hard-Working Arizonans directing the Arizona Department of Revenue to update State of Arizona tax forms to enable taxpayers to benefit from Governor Hobbs’ Middle Class Tax Cuts Package on their 2025 taxes. 

With the Executive Order, tax forms in the upcoming year will be updated to include the higher standard deduction passed into law by H.R. 1. The Executive Order also directs ADOR to include prospective instructions for Arizonans to take advantage of tax deductions on tips, overtime, car loan interest, and additional deductions for seniors in anticipation of the legislature codifying them into law.

“I’m proudly working to deliver this tax cut for middle class Arizonans,” said Governor Katie Hobbs. “Arizona must provide relief for families who are seeing the cost of living increasing and struggling just to get by. While I’ve taken this important step to cut taxes for the middle class, there’s still more work to be done. I encourage the legislature to join with me to immediately codify my Middle Class Tax Cuts Package to increase the standard deduction, support our seniors and allow everyday Arizonans to benefit from tax deductions on tips, overtime, and car loan interest when paying their state taxes.”

Governor Hobbs’ Middle Class Tax Cuts Package will begin bringing State of Arizona tax forms in conformity with portions of H.R. 1 that benefit middle class Arizonans. Because the vast majority of taxpayers will file prior to completion of the FY27 budget, Governor Hobbs is calling on the state legislature to pass her Middle Class Tax Cuts Package at the beginning of session to deliver tax certainty to everyday Arizonans as they file their taxes.

“It’s vital that we cut taxes for the middle class and create certainty for the vast majority of Arizona taxpayers by passing the Middle Class Tax Cuts Package immediately in the new year,” continued Governor Hobbs. “Arizonans are relying on us to provide tax relief, ease the cost of living crisis, and deliver certainty during the upcoming tax season.”

Any further tax conformity provisions affecting corporations and high earners will be negotiated in the FY27 budget, as is standard for legislation with fiscal impacts.

Once signed into law, Governor Hobbs’ Middle Class Tax Cuts Package will:

• Increase the Standard Deduction on state tax forms from $15,000 to $15,750 for single filers, $31,500 for joint filers
• Add an additional $6,000 deduction for Arizonans over 65
• Allow Arizonans to deduct tipped income from taxes
• Allow Arizonans to deduct eligible overtime income from taxes
• Allow Arizonans to deduct interest for car loans on new, American-made vehicles from taxes

Below is an example of the changes a hypothetical middle class Arizonan, Sally, may see:

Sally is a 68 year old single individual who earns tips working full time at an Arizona casino. Some weeks she even works overtime. She also purchased a new car in 2025.

Sally’s Arizona return if the legislature does not adopt Governor Hobbs’ Middle Class Tax Cuts Package:

• Federal Adjusted Gross Income: $75,000
• Standard Deduction: $15,000
• Arizona Taxable Income: $60,000
• Arizona Tax (2.5%):  $1,500

Sally’s Arizona return if the legislature does adopt Governor Hobbs’ Middle Class Tax Cuts Package:

• Federal Adjusted Gross Income: $75,000
• Standard Deduction $15,750
• Arizona Other Subtractions: $18,000
• Additional deduction for 65+: $6,000
• Tip income subtraction: $5,000
• Overtime wages subtraction: $3,000
• Car Interest: $4,000
• Arizona Taxable Income: $41,250
• Arizona State Tax Paid (2.5%): $1,031

With Governor Hobbs’ Middle Class Tax Cuts Package, Sally receives a $469 tax cut.

Read Executive Order 2025-15 Cutting Taxes for Hard-Working Arizonans HERE.

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