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Arizona Does Not Tax Active Duty Pay — Guard and Reserve Included

Compensation for active service in the armed forces, the reserves or the National Guard is subtracted in full from Arizona taxable income, and has been since tax year 2006. Combat-zone pay is inside it. Residents claim it on Form 140 and part-year residents on Form 140PY. This is a different paragraph of A.R.S. 43-1022 from the military RETIREMENT subtraction — the two are separate and both exist.

Verified August 27, 2026

What this benefit is

Compensation for active service in the armed forces, the reserves or the National Guard is subtracted in full from Arizona taxable income, and has been since tax year 2006. Combat-zone pay is inside it. Residents claim it on Form 140 and part-year residents on Form 140PY. This is a different paragraph of A.R.S. 43-1022 from the military RETIREMENT subtraction — the two are separate and both exist.

What it's worth: Active service pay subtracted in full from Arizona taxable income

  • The subtraction covers compensation for active service in the armed forces, the reserves and the National Guard.
  • Combat-zone pay is included.
  • It has applied since tax year 2006.
  • It is a subtraction of income, so the saving is your marginal Arizona rate applied to the amount, not the amount itself.
  • This is a different paragraph of A.R.S. 43-1022 from the military retirement subtraction. Both exist and they are not alternatives.
  • Residents claim it on Form 140; part-year residents on Form 140PY.

Who is entitled to it

  • You have pay for active service.
  • You are currently serving.
  • You are a serving member of the National Guard.
  • You file in Arizona.

Not sure whether that describes you?

Answer a few questions about this benefit specifically — we only ask what this one actually depends on, and we stop as soon as we know.

How to claim it

Deadline: With your annual Arizona return
  1. 1Claim the subtraction on Form 140 as a resident, or Form 140PY as a part-year resident.
  2. 2Include Guard and reserve active-service pay — this is not confined to full-time active duty.
  3. 3Include combat-zone pay, which is inside the subtraction rather than separate from it.
  4. 4If you also draw military retirement, claim that under its own paragraph as well. They are separate subtractions.
Form
Arizona Form 140 or 140PY
File with
Arizona Department of Revenue, with your annual return
Annual
Claimed once a year.
Worth knowingThis is a serving-member benefit rather than a veteran one, and is tagged as such. It is carried because it reaches Guard and reserve active-service pay, and because the corpus already carries the retirement subtraction from the same section.

Sources

This finder provides an informational match, not a government eligibility determination. The responsible agency decides your application.