Other Additions to Income
Use line 16 if any of the special circumstances below apply. Include your own schedule with your return explaining any
amounts entered here. You may either add or subtract items A through C below on line 16 or 35, respectively, depending on your situation.
A. Married Persons Filing Separate Returns If you file a separate Arizona return, you must report the following income on that return.
One-half of the community income from all sources.
All of your separate income.
If you and your spouse file a joint federal return but separate Arizona returns, you must make sure that each separate return reflects the correct income. If you begin your Arizona return with only the income that you earned during the year, you will have to adjust this income.
If you file separate federal returns, each of your federal returns should already reflect the correct income. Since your separate Arizona returns will begin with the federal adjusted gross income, you will not have to adjust your income.
If you have to adjust your income, include a schedule showing how you figured your adjustment. For more information, see the department’s publication, Pub. 200.
B. Partnership Income
Use this adjustment if your Arizona Form 165, Schedule K-1, shows a difference between federal and state distributable
income. If the difference reported on your Arizona Form 165, Schedule K-1, is a positive number, enter that difference as
an addition. Enter the addition on line 16. If the difference reported on your Arizona Form 165, Schedule K-1, is a negative number, enter that difference as a subtraction. Enter the subtraction on line 35.
C. Fiduciary Adjustment
A fiduciary uses Form 141AZ, Schedule K-1, to report to you your share of the fiduciary adjustment from the trust or estate. Line 3 of Form 141AZ, Schedule K-1, shows your share of the fiduciary adjustment from the estate or trust. If the
amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a positive number, enter that amount as an
addition. Enter the addition on line 16. If the amount reported on line 3 of your Arizona Form 141AZ, Schedule K-1, is a negative number, enter that amount as a subtraction. Enter the subtraction on line 35.
D. Items Previously Deducted for Arizona Purposes Arizona statutes prohibit a taxpayer from deducting items more than once. If your Arizona taxable income includes items previously deducted for Arizona purposes, you must add such amounts to your Arizona gross income.
E. Claim of Right Adjustment for Amounts Repaid in 2014 You must make an entry here if all of the following apply.
1. During 2014, you were required to repay amounts held
under a claim of right.
2. The amount required to be repaid during 2014 was more than $3,000.
3. You took a deduction for the amount repaid on your 2014 federal income tax return. If the above apply, enter the amount deducted on your federal income tax return here. For more information on the Arizona claim of right provisions, see the department’s Individual Income Tax Procedure ITP 95-1.
F. Claim of Right Adjustment for Amounts Repaid in Prior Taxable Years
You must make an entry here if all of the following apply.
1. During a year prior to 2014 you were required to repay amounts held under a claim of right.
2. You computed your tax for that prior year under Arizona's claim of right provisions.
3. A net operating loss or capital loss was established due to the repayment made in the prior year.
4. You are entitled to take that net operating loss or capital loss carryover into account when computing your 2014
Arizona taxable income.
5. The amount of the loss carryover included in your federal income is more than the amount allowed to be
taken into account for Arizona purposes. Enter the amount by which the loss carryover included in your federal adjusted gross income is more than the amount
allowed for the taxable year under Arizona law.
G. Addition to S Corporation Income Due to Credits Claimed
Shareholders of an S corporation who claim a credit passed through from an S corporation must make an addition to
income for the amount of expenses disallowed by reason of claiming the credit. An S corporation that passes the following credits through to its shareholders must notify each shareholder of his or her pro rata share of the adjustment. You must enter an amount on this line when claiming any of the following Arizona credits.
Agricultural water conservation system credit (Form 312)
Environmental technology facility credit (Form 305)
Pollution control credit (Form 315)
Credit for solar hot water heater plumbing stub outs and electric vehicle recharge outlets (Form 319)
Credit for employment of TANF recipients (Form 320)
Agricultural pollution control equipment credit (Form 325)
Motion picture credits (Form 334)
H. Solar Hot Water Heater Plumbing Stub Outs and Electric Vehicle Recharge Outlet Expenses
If you claim a credit for installing solar hot water heater plumbing stub outs or electric vehicle recharge outlets in a
dwelling you constructed on Form 319, you cannot deduct any expenses for which you claim the credit. If you take this
credit, enter the amount of such expenses that you deducted on your federal return.
I. Wage Expense for Employers of TANF Recipients
If you claim a credit for employing TANF recipients on Form 320, you cannot deduct any wage expense for which
you claim the credit. If you take this credit, enter the amount of such expenses that you deducted on your federal return.
J. Motion Picture Expenses
If you claim a motion picture credit on Form 334, you cannot deduct any expenses deducted on your federal return related
to the production or related to a transferred credit. Enter the amount of any such expenses that were deducted in
computing federal adjusted gross income for which you claimed a credit.
K. Adjusted Basis in Property for Which You Have Claimed a Credit for Investment in Qualified Small Businesses
If you claim a credit for an investment in a qualified small business on Form 338, you must adjust your basis in the
investment by the amount of the credit claimed. You must report this difference in basis on the Arizona return that you
file for the taxable year in which you sell or otherwise dispose of the investment. If you sold or otherwise disposed
of the investment during the 2014 taxable year, on line 16, enter the amount by which the adjusted basis computed under
the IRC with respect to that property exceeds the adjusted basis of the property computed under A.R.S. § 43-1074.02.
L. Nonqualified Withdrawals From 529 College Savings Plans
You must make an addition to income if both of the following apply to you.
1. You received a nonqualified withdrawal from a 529 college savings plan.
2. You did not include the amount of the withdrawal in your federal adjusted gross income.
The amount that you must add is the amount withdrawn, but no more than the difference between the amount of contributions subtracted in prior years and the amount added in any prior years. A nonqualified withdrawal is a withdrawal other than any of the following:
1. A qualified withdrawal. A qualified withdrawal is a withdrawal from an account to pay the qualified higher
education expenses of the designated beneficiary of the account.
2. A withdrawal made as the result of the death or disability of the designated beneficiary of an account.
3. A withdrawal that is made on the account of a scholarship, or the allowance or payment described in
IRC § 135(d)(1)(B) or (C) , and that is received by the designated beneficiary, but only to the extent of the
amount of this scholarship, allowance or payment.
4. A rollover or change of designated beneficiary.
M. Original Issue Discount (OID) on Reacquisition of Debt Instrument
For federal purposes, when a taxpayer made the special election to defer discharge of indebtedness (DOI) income under IRC § 108(i) (for 2009 or 2010), the taxpayer was not allowed to take a deduction with respect to the portion of any OID that accrued with respect to that DOI income, during the income deferral period. In this case, the taxpayer had to deduct the aggregate amount of the OID deductions disallowed ratably over a 5 year period, beginning with the period in which the income was includible in federal adjusted gross income.
Arizona did not adopt the federal provisions requiring a taxpayer to defer the OID deduction in cases where the
taxpayer federally deferred the DOI income. For Arizona purposes, you had to report the DOI income from a debt
reacquisition in the year in which you reacquired the debt, and you were allowed to subtract any OID related to that DOI
income in the year the OID accrued. If your federal adjusted gross income includes a deduction for any accrued OID that
you have already subtracted for Arizona purposes, you must make an addition to Arizona income for the amount of
deferred OID deducted on your federal return. Generally, this addition will not apply until taxable year 2014 through 2018.
On line 16, enter the amount of any previously deferred OID that you deducted in computing your 2014 federal adjusted
gross income, to the extent that the amount was previously subtracted from Arizona gross income.
N. Qualified Health Insurance Plans
If you claimed a credit on Form 347, you may not deduct any expenses for which you claim the credit. If you take this
credit, enter the amount of such expenses that you deducted on your federal return.
O. Arizona Long-Term Health Care Savings Accounts (AZLTHSA) Withdrawals
You must add amounts withdrawn from your AZLTHSA if you withdrew money for purposes other than paying for
qualified long-term health care expenses.
P. Sole Proprietorship Loss of an Arizona Nonprofit Medical Marijuana Dispensary included in Federal
Adjusted Gross Income
If you are registered as an Arizona sole proprietorship with the Arizona Department of Health Services to operate in this
state as a nonprofit medical marijuana dispensary, you are required to add the amount of the loss from the dispensary
that is included in the computation of your federal adjusted gross income. Include the amount of the loss on line 16.
NOTE: If the Arizona nonprofit medical marijuana dispensary is registered with the Arizona Department of
Health Services as anything other than a sole proprietorship, this addition does not apply.
Q. Other Adjustments
Other special adjustments may be necessary. You may need to make an addition for depreciation or amortization. You
may also need to make an addition if you claimed certain tax credits. Call one of the numbers listed on the back cover if
any of the following apply.
You sold or disposed of property that was held for the production of income and your basis was computed
under the Arizona Income Tax Act of 1954, as amended (1978 prior), except depreciable property.
You claimed the environmental technology facility credit.
You claimed the pollution control credit.
You claimed the recycling equipment credit.
You claimed the agricultural pollution control equipment
You elected to amortize the cost of a child care facility under Arizona law in effect before 1990. You are still
deducting amortization or depreciation for that facility on your federal income tax return.