Ariz. Admin. Code § R15-2A-202 - Items Not Deductible in Computing Taxable Income
A. Personal and family expenses. Insurance
paid on a dwelling owned and occupied by a taxpayer is a personal expense and
not deductible. Premiums paid for life insurance by the insured are not
deductible. In the case of a professional man who rents a property for
residential purposes but incidentally receives clients, patients, or caller
there in connection with his professional work (his place of business being
elsewhere), no part of the rent is deductible as a business expense. However,
if he uses part of the house for his office, such portion of the rent as is
properly attributable to such office is deductible. If the father is entitled
to the services of his minor children, any allowances that he gives them
whether said to be in consideration of services or otherwise are not allowable
deductions in his return of income. Generally, attorneys' fees paid in a suit
for divorce or separate maintenance are not deductible. However, the part of an
attorney's fee paid in a divorce or separate maintenance proceeding that is
properly attributable to the production or collection of amounts of includible
in gross income is deductible. Amounts paid as alimony or allowance for support
on divorce or separation are not deductible except as otherwise provided. The
cost of equipment of an Army officer to the extent only that it is especially
required by his profession and does not merely take the place of articles
required in civilian life is deductible. Accordingly, the cost of a sword is an
allowable deduction, but the cost of a uniform is not. See Section 43-1049 for
deduction of extraordinary medical expenses including amounts paid for accident
or health insurance.
B. Amounts
allocable to non-includible income
1. Class of
non-includible income
a. This Section applies
to income that is not required to be included in Arizona adjusted gross income
or Arizona taxable income. Examples of such non-includible income would be
interest exempt from the Arizona income tax by the Constitution or federal or
state law, or the income of a corporation which was derived from sources
outside this state. The fact that a person's otherwise taxable income may be
reduced by allowable deductions and personal exemptions will not render such
income subject to this provision.
b. The object is to segregate non-includible
income from the taxable income in order that a double exemption may not be
obtained through the reduction of taxable income by expenses and other items
incurred in the production of items of non-includible income. Accordingly, just
as certain items of income are excluded from the computation of Arizona gross
income and Arizona taxable income by Sections
43-1022
and
43-1122,
Section
43-961
excludes from the computation of deductions all items referable to the
production of non-includible income as above defined.
2. Determination of amounts allocable to a
class of exempt income
a. No deduction may be
allowed for the amount of any item or part thereof allocable to a class or
classes of exempt income, or other income not includible in Arizona adjusted
gross income or Arizona taxable income.
Example: Expenses paid or incurred for the production or collection of income that is wholly exempt from income taxes such as interest or dividends of a type not includible in gross income are not deductible expenses. Items or parts of such items directly attributable to any class or classes of exempt income shall be allocated to that, and items or parts of such items directly attributable to any class or classes of taxable income shall not be allocated to that.
b. If
an item is indirectly attributable both to taxable income and to non-includible
income, a reasonable proportion of it determined in the light of the facts and
circumstances in each case shall be allocated to each. Apportionments must in
all cases be reasonable.
3. Statement of items of non-includible
incomes-records
a. A taxpayer receiving any
class of non-includible income or holding any property or engaging in any
activity the income from which is non-includible shall submit with his return
as a part of it an itemized statement in detail showing:
i. the amount of each class of such
non-includible income and
ii. the
amount of items or parts of items allocated to each such class (the amount
allocated by apportionment being shown separately) as required by subsection
(B)(2) of this subsection.
b. If an item is apportioned between a class
of non-includible income and a class of taxable income, the statement shall
show the basis of the apportionment.
Such statement shall also recite that each deduction claimed in the return is not in any way referable to non-includible income.
Notes
State regulations are updated quarterly; we currently have two versions available. Below is a comparison between our most recent version and the prior quarterly release. More comparison features will be added as we have more versions to compare.
No prior version found.