On May 13, 2025, Arizona Governor Katie Hobbs signed Senate Bill 1274, known as the “Tax Corrections Act of 2025,” into law. One of the key provisions of this legislation is a significant change to the Arizona income tax withholding rate for gambling winnings. Previously, Arizona required income tax withholding on gambling winnings at 20% of the federal income tax withholding amount (generally 4.8% or 6% for non-resident aliens). Under the new law, the Arizona income tax withholding rate for gambling winnings will align with the highest individual income tax rate prescribed by Arizona Revised Statutes section 43-1011, which is currently a flat 2.5%.
Arizona has not announced the effective date for this change yet but is expected to post it here. Unless a specific date is noted in the bill, Arizona laws become effective 90 days after the legislature ‘adjourns sine die’, which for the 2025 Fifty-seventh Legislature First Regular Session was scheduled for April 26, 2025.
See SB1274 for the full text information.
