December 2025

Stay informed with the latest updates from the Arizona Department of Revenue (ADOR) and the IRS.

New Deduction: Car Loan Interest

The One Big Beautiful Bill Act (OBBBA) allows eligible taxpayers to deduct up to $10,000 per year in car loan interest from 2025–2028. The deduction phases out starting at $100,000 MAGI for single filers and $200,000 MAGI for joint filers. Vehicles must be new, assembled in the U.S., and under 14,000 pounds.

NOL Deductions for Business Losses

Businesses experiencing losses can leverage Net Operating Loss (NOL) deductions to offset future taxable income. NOLs can be carried forward indefinitely but are limited to offsetting 80% of taxable income. The Inflation Reduction Act extended the excess business loss limitation through 2028.

Remote Work Tax Implications

Employees working across state lines may face double taxation if domiciled in one state but resident in another. Employers must manage multistate payroll withholding and may trigger nexus obligations in new jurisdictions.

Tax Tips

High-Low Per Diem Rates: Standard per diem is $225; high-cost areas are $319 (Oct 2025–Sept 2026).
Accelerating Deductions: Consider accelerating medical, mortgage, or charitable expenses into 2025 if itemizing.
Employee Gifts: Tangible gifts may be tax-free, but cash bonuses remain taxable.

Updates from ADOR

Arizona applies a 2.5% flat income tax rate for 2025.
Businesses must renew their TPT License by Jan 1, 2026 to avoid penalties.
ADOR released its Fiscal Year 2025 Annual Report highlighting compliance improvements.

Updates from the IRS

IRS Notice 2025-69 clarifies deductions for employee tips and overtime pay.
The IRS e-file system will close on Dec 26, 2025 for year-end maintenance.
Rev. Proc. 2024-40 confirms updated tax brackets and standard deductions for 2025.

Upcoming Deadlines

Dec 15, 2025: Corporations must pay the fourth installment of estimated income taxes.
Jan 12, 2026: Employees must report December tip income of $20 or more to employers.

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