Arizona · Student Loan Interest Deduction
Student Loan Interest Deduction in Arizona (2026)
Deduct up to $2,500 of student loan interest paid during the tax year. Arizona has a flat 2.5% income tax, so a Arizona filer's combined marginal rate on the next dollar at $72,581 of income is about 24.5% (22% federal + 2.5% AZ).
2026 savings example for Arizona
Planning estimate for a single filer earning $72,581 (Arizona median household income in LevyIO's state dataset) who removes $2,500 from taxable income. Federal tax uses the 2026 IRS brackets after the $16,100 standard deduction; AZ tax uses the state brackets in LevyIO's dataset and assumes the state follows the federal treatment.
Estimated total savings
$613
Federal savings
$550
$7,138 → $6,588 · 22% bracket
AZ state savings
$63
$1,450 → $1,387 · 2.5% marginal
Combined marginal rate
24.5%
≈ $245 saved per $1,000 deducted
Statutory maximum for this item in LevyIO's dataset: $2,500.
Federal × Arizona marginal rates (2026, single)
Gross-income ranges include the federal standard deduction. The AZ column is the state marginal rate at the midpoint of each range. The last column is the tax saved per $1,000 deducted at that combined rate.
| Federal bracket | Gross income (single) | AZ marginal | Combined | Per $1,000 |
|---|---|---|---|---|
| 10% | $16,100 - $28,500 | 2.5% | 12.5% | $125 |
| 12% | $28,500 - $66,500 | 2.5% | 14.5% | $145 |
| 22% | $66,500 - $121,800 | 2.5% | 24.5% | $245 |
| 24% | $121,800 - $217,875 | 2.5% | 26.5% | $265 |
| 32% | $217,875 - $272,325 | 2.5% | 34.5% | $345 |
| 35% | $272,325 - $656,700 | 2.5% | 37.5% | $375 |
| 37% | Over $656,700 | 2.5% | 39.5% | $395 |
Eligibility & forms
Individuals paying student loan interest with income under $90K single/$185K married
- Must be legally obligated
- For qualified education expenses
- Income phase-outs apply
Federal forms: Form 1098-E, Form 1040
Arizona filing notes
Arizona's flat 2.5% rate simplifies planning. Use the 25% capital gains subtraction on investment income. Arizona offers generous tax credits for charitable contributions and school tuition organizations.
Common mistakes: Exceeding income limits; Deducting parent PLUS loan interest on student's return.
Frequently asked questions
How much can the Student Loan Interest Deduction save a Arizona taxpayer in 2026?
In LevyIO's example, a single filer with $72,581 of income (the Arizona median household income in our state dataset) who removes $2,500 from taxable income saves about $550 in 2026 federal tax (22% marginal bracket) plus about $63 in Arizona tax (2.5% state marginal rate), roughly $613 combined. It is a planning estimate computed from the 2026 IRS brackets and LevyIO's AZ bracket data, not a survey figure.
What is the Arizona income tax rate for 2026?
Arizona has a flat 2.5% income tax. The AZ standard deduction in LevyIO's dataset is $14,600 single / $29,200 married. Flat 2.5% rate since 2023. 25% capital gains subtraction. Generous charitable contribution credits.
Who qualifies for the Student Loan Interest Deduction in Arizona?
Individuals paying student loan interest with income under $90K single/$185K married. The federal rules are the same in every state; the requirements are: Must be legally obligated; For qualified education expenses; Income phase-outs apply. Arizona filers should confirm on the AZ return whether the state follows the federal treatment.
Which forms do I file to claim the Student Loan Interest Deduction?
Federal: Form 1098-E, Form 1040. Arizona: check the Arizona Department of Revenue instructions for the matching state schedule. Common mistakes: Exceeding income limits; Deducting parent PLUS loan interest on student's return.
Student Loan Interest Deduction in other states
Sources
Reviewed 2026-09-17. Estimates are educational planning figures computed from the IRS 2026 inflation adjustments and LevyIO's state bracket dataset; they are not tax advice.