ARIZONA - As Arizona enters 2026, the state is implementing a series of new laws and regulatory adjustments focused on housing affordability, labor costs, and consumer protections. While many legislative changes take effect in the fall, several high-profile shifts are tied explicitly to the January 1st milestone.
Here are five of the most significant new laws and regulations taking effect in the Grand Canyon State this January.
1. 2026 Minimum Wage Increase
In accordance with the Fair Wages and Healthy Families Act, Arizona's minimum wage is scheduled to increase as part of its annual inflation-based adjustment.
- The New Rate: Starting January 1, 2026, the statewide minimum wage increases to $15.15 per hour.
- Local Variations: Some cities have even higher mandates. For example, the minimum wage in Flagstaff will rise to $18.35 per hour, while in Tucson it will increase to $15.45 per hour.
- Tipped Employees: Employers may still pay tipped workers $3.00 less than the minimum wage, provided their combined wages and tips equal at least the new hourly standard.
2. The "Middle Housing" Expansion (HB 2721)
One of Arizona's most significant efforts to combat the housing crisis reaches a major implementation deadline this January. House Bill 2721 requires Arizona's most important cities (those with populations over 75,000) to allow for "middle housing" in areas previously reserved for single-family homes.
- The Change: Municipalities must now permit duplexes, triplexes, fourplexes, and townhomes on residential lots.
- The Goal: By bypassing restrictive local zoning, the law aims to increase the supply of smaller, more affordable housing options in high-demand urban and suburban neighborhoods.
3. Pharmacy Benefit Manager Reform (SB 1102)
Arizona patients gain new protections against mid-year prescription coverage changes. Senate Bill 1102 targets "non-medical switching," where insurance companies or Pharmacy Benefit Managers (PBMs) change their lists of covered drugs during a plan year.
- Coverage Stability: The law prohibits insurers from removing a drug from a patient's coverage or moving it to a more expensive "tier" if the patient is already stable on that medication.
- Continuity of Care: This ensures that patients do not face sudden out-of-pocket costs or health risks from being forced to switch medications before their plan year concludes.
4. Higher Charitable Tax Credit Caps
Arizona's popular tax credits for charitable donations are seeing upward adjustments for the 2026 tax year. These credits allow taxpayers to redirect a portion of their state tax liability to specific qualifying organizations.
- General Charities: The maximum credit for Qualifying Charitable Organizations (QCO) increases to $506 for single filers and $1,009 for married couples filing jointly.
- Foster Care: For Qualifying Foster Care Organizations (QFCO), the limits rise to $632 for single filers and $1,262 for married couples.
5. Retirement Income Withholding Updates (SB 1358)
Senate Bill 1358, a change to the State tax code, updates how retirees manage state income tax on their distributions.
- Simplified Withholding: The law streamlines the process for Arizonans to request that state tax be withheld from their pensions, annuities, and other retirement accounts.
- Standardization: It establishes that these distributions are to be treated similarly to wage payments for state tax purposes when a withholding request is active, helping retirees avoid large, unexpected tax bills at the end of the year.
Additional 2026 Outlook
Beyond these changes, the state is also moving forward with the "Turquoise Alert" system for missing Indigenous persons and new training requirements for school safety officers. Additionally, the Arizona Department of Environmental Quality (ADEQ) will begin new annual reporting requirements this January to streamline the reimbursement process for environmental cleanups.
