# Arizona Tax Breaks for Businesses, Veterans & Adoptions Take Effect January 2026

*Published:* 2025-12-22
*Author:* Elizabeth Edwards

Big changes are on the horizon for Arizona taxpayers starting January 1, 2026. [Senate Bill 1749 (SB1749)](https://www.azleg.gov/legtext/57Leg/1R/laws/0247.pdf), passed as part of the state’s budget, introduces new tax breaks and expands several existing ones—especially for veterans, adoptive families, and businesses. Here’s a quick breakdown of what’s changing and who benefits.

**Veterans See Major Tax Breaks**

1. Veterans’ Pensions Now Fully Excluded from Income Caps – Starting in 2026, all veterans’ pensions—not just disability pensions—will be excluded when calculating income for exemptions. This means more veterans may qualify for income-based tax relief programs. A.R.S. § 43-1022 (Amended)
2. Full Property Tax Exemption for 100% Disabled Veterans – Veterans with a 100% VA service-connected disability rating will no longer pay property taxes on their primary residence. 
    - Surviving spouses can continue claiming the exemption as long as they don’t remarry and the home remains their main residence.
    - The previous property value cap of $31,347 to qualify has been removed.
    - A.R.S. § 42-11111 (Amended)

**Adoption Tax Deduction Gets a Boost**

The deduction for adoption-related expenses will increase in 2026 to:

- $5,000 for single filers or heads of household
- $10,000 for married couples filing jointly

Eligible Subtracted Expenses:

- Unreimbursed medical and hospital costs
- Legal fees
- Adoption counseling and agency fees
- Other nonrecurring adoption costs

Key Rules:

- Subtraction applies only in the year the final adoption order is granted
- Expenses incurred in prior years can be included
- Deduction is limited by filing status:

**Filing Status**

**Max Deduction (2026+)**

Single or Head of Household

$5,000

Married Filing Jointly

$10,000

Married Filing Separately

Up to $10,000 combined

A.R.S. § 43-1022, Paragraph 12 (Amended)

**Business Owners See Significant Tax Relief: Business Personal Property Tax Exemption Doubled**

The threshold for exempting business personal property from taxation will jump from:

- $269,905 (in 2025)
- To $500,000 (in 2026)

Applies to the *full cash value* of personal property used in business (including equipment, furniture, and fixtures.) This can reduce both taxes and paperwork for thousands of small and mid-sized businesses. Tip: review equipment and asset schedules for potential savings or reclassification in 2026.