Arizona Administrative Code › Title 15 - REVENUE › Chapter 2 - DEPARTMENT OF REVENUE - INCOME AND WITHHOLDING TAX SECTION › Subchapter A - GENERAL AND ADMINISTRATIVE › Article 2 - GENERAL ACCOUNTING PROVISIONS › Section R15-2A-202 - Items Not Deductible in Computing Taxable Income

Current through Register Vol. 30, No. 28, July 12, 2024
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.