Does Arizona Have a Real Estate Transfer Tax?

Arizona does not charge a real estate transfer tax. A 2008 constitutional amendment bars the state and every local government from imposing any new tax, fee, or assessment on the sale or transfer of real property, which puts Arizona among the cheapest states in the country for transfer-related closing costs. One small flat fee of $2 per deed still applies under a law that predates the amendment, and sellers and buyers remain on the hook for standard recording charges and federal tax obligations.

Why Arizona Has No Transfer Tax

Proposition 100, approved by voters in November 2008, added Section 24 to Article IX of the Arizona Constitution. It prohibits the state, any county, city, town, or other political subdivision from imposing any new tax, fee, or assessment on the sale, purchase, or transfer of any interest in real estate after December 31, 2007.¹ Because the ban sits in the constitution, the legislature cannot repeal it alone. Overturning it would require another constitutional amendment and voter approval at a general election.

Other states charge anywhere from a fraction of a percent to over 2% of the sale price, which on a typical home translates into thousands of dollars at closing. Arizona sellers and buyers avoid that entirely.

The $2 Flat Deed Fee

Arizona is not completely fee-free at the deed level. Under ARS 11-1132, the county recorder collects a $2 fee before recording any deed or contract related to the sale or transfer of real property.² This charge existed before Proposition 100, so it was grandfathered in when the broader ban took effect. It is folded into the total recording charges paid at closing, and most buyers and sellers never notice it as a separate line item.

The Affidavit of Property Value

Every deed or sales contract submitted for recording must include an affidavit of property value, sometimes called the affidavit of legal value. Under ARS 11-1133, the buyer and seller or their agents must jointly certify details about the transaction on a form approved by the Arizona Department of Revenue.³ The affidavit covers:

Sale price and financing terms, including the cash down payment, any new third-party loan, seller financing, assumptions, or property exchanges.
Full legal description, situs address, and the assessor’s parcel number.
Names and addresses of buyer and seller, their relationship if any, and the conditions of the transaction.
Description of the property and, for residential dwellings, whether it will be owner-occupied or rented.

The county recorder will refuse to record a deed that lacks a completed affidavit unless the instrument notes an exemption code under ARS 11-1134.³ Missing or incomplete affidavits are the most common reason deeds get rejected at the counter. The form is available from the Arizona Department of Revenue.⁴

Transfers Exempt From the Fee and Affidavit

ARS 11-1134 lists transfers that skip both the $2 fee and the affidavit. If a transfer qualifies, the deed still has to be recorded, but the applicable exemption code goes on the instrument instead of an attached affidavit.⁵

Family Transfers

Transfers of residential property between close family members for nominal consideration are exempt. The statute covers spouses, parents and children (including adopted children and their descendants), grandparents and grandchildren, and siblings.⁵ Deeds of gift are exempt regardless of relationship. The key is that little or no actual money changes hands. A sale at full market value between a parent and child would not qualify.

Court-Ordered and Estate Transfers

Any conveyance executed pursuant to a court order is exempt, which covers divorce property divisions and most probate distributions. Transfers between a person and a trustee, or from a trustee to a beneficiary, are exempt when only nominal consideration is involved. Beneficiary deeds, which pass property automatically on the owner’s death, also qualify.⁵

Business Entity Transfers

Transfers between related business entities without real consideration are exempt. The statute covers parent-to-subsidiary and subsidiary-to-parent transfers, transfers between commonly controlled entities, transfers between members and their LLCs, partners and their partnerships, joint venturers and their joint ventures, transfers to a single-purpose entity created to obtain financing, and transfers pursuant to a merger.⁵

Other Exempt Instruments

Several other categories round out the list: deeds fulfilling or forfeiting a recorded purchase contract, leases and easements of any length, government-issued deeds and patents, quitclaim deeds filed to quiet title with no monetary consideration, deeds to unpatented mining claims, deeds correcting or confirming a previously recorded deed, transfers to provide or release security for a debt (including trustee’s deeds under a deed of trust), and deeds creating joint tenancy, community property with right of survivorship, or similar ownership changes among existing owners.⁵

Federal Taxes That Still Apply

No state transfer tax does not mean a tax-free sale. Federal law reaches most Arizona closings in one way or another.

Capital Gains on the Profit

Sellers face federal capital gains tax on any profit. Under 26 U.S.C. § 121, you can exclude up to $250,000 of gain if you file single, or up to $500,000 if you file jointly, provided you owned the home for at least two of the five years before the sale and used it as your primary residence for at least two of those five years.⁶ The two-year periods do not need to be consecutive or overlap.

For joint filers, either spouse can satisfy the ownership test, but both must independently meet the use test.⁷ You also cannot have claimed the exclusion on another home sale within the prior two years. Any gain above the exclusion is taxed at federal capital gains rates, which comes up often with long-held Arizona properties that have appreciated significantly. A surviving spouse who sells within two years of the other spouse’s death can still claim the full $500,000 exclusion.⁶

FIRPTA Withholding for Foreign Sellers

When a foreign person sells real property in Arizona, federal law requires the buyer to withhold 15% of the gross sale price and send it to the IRS as a prepayment toward the seller’s tax liability.⁸ The money comes directly out of proceeds at closing, which catches many foreign sellers off guard.

Two exceptions reduce or eliminate the withholding when the buyer intends to use the property as a personal residence:

No withholding on sales of $300,000 or less if the buyer will use the property as a residence.⁸
Withholding drops to 10% on sales between $300,001 and $1,000,000 if the buyer will use the property as a residence.⁸

Sales above $1,000,000, or any sale where the buyer does not plan to live in the property, carry the full 15%. The withholding is not the seller’s final tax bill; it is a deposit. If the seller’s actual tax liability is lower, they file a U.S. tax return to claim the difference back.

Gift Tax on Family Transfers

A family transfer that qualifies for Arizona’s recording exemption can still trigger federal gift tax obligations. When you transfer property for less than its fair market value, the IRS treats the shortfall as a gift. For 2026, you can give up to $19,000 per recipient without filing a gift tax return or using any lifetime exemption.⁹ Married couples who elect to split gifts can give $38,000 per recipient.

Real property is almost always worth far more than $19,000, so a gift of a home will typically require filing IRS Form 709 and will count against the lifetime exemption. For 2026, that lifetime gift and estate tax exemption is $15,000,000 per person.¹⁰ No actual gift tax is owed until cumulative lifetime gifts exceed that threshold, so most families never write a check. Skipping the return is a separate problem; the IRS expects the paperwork regardless of whether tax is due.

1099-S Reporting at Closing

Most Arizona real estate sales trigger a federal reporting requirement on Form 1099-S, which reports gross proceeds paid to the seller. The person responsible for closing the transaction, typically the title company, escrow agent, or settlement attorney listed on the closing disclosure, files the form with the IRS.¹¹ If no closing agent is involved, responsibility shifts in order to the mortgage lender, then the seller’s broker, then the buyer’s broker, and finally the buyer.

Sellers who qualify for the full Section 121 capital gains exclusion can certify in writing to the closing agent that the sale meets the exclusion requirements, which may relieve the filer’s obligation to issue a 1099-S for that transaction. A 1099-S being issued does not mean you owe tax; it means the IRS knows about the sale and will expect to see it addressed on your return if applicable.

One Non-Tax Federal Obligation Worth Flagging

Not a tax, but easy to miss at closing: federal law requires sellers of homes built before 1978 to disclose known lead-based paint hazards, provide any available records or reports, give the buyer a copy of the EPA’s “Protect Your Family From Lead in Your Home” pamphlet, and include a lead warning statement in the contract. The buyer also gets a 10-day window to conduct a lead paint inspection unless the parties agree otherwise in writing. The rule does not apply to homes built after 1977, foreclosure sales, or housing designated exclusively for the elderly or persons with disabilities (unless a child under six lives or will live there).¹²

1
Ballotpedia. Arizona Proposition 100, Prohibition of New Property Tax Amendment (2008)
2
Arizona Legislature. Arizona Code 11-1132 – Real Estate Transfer Fee; Collection; Disposition of Proceeds
3
Arizona Legislature. Arizona Code 11-1133 – Affidavit of Legal Value
4
Arizona Department of Revenue. Affidavit of Property Value
5
Arizona Legislature. Arizona Code 11-1134 – Exemptions
6
Office of the Law Revision Counsel. 26 USC 121 – Exclusion of Gain From Sale of Principal Residence
7
Internal Revenue Service. Sale of Your Home
8
Office of the Law Revision Counsel. 26 USC 1445 – Withholding of Tax on Dispositions of United States Real Property Interests
9
Internal Revenue Service. Frequently Asked Questions on Gift Taxes
10
Internal Revenue Service. What’s New – Estate and Gift Tax
11
Internal Revenue Service. Instructions for Form 1099-S
12
United States Environmental Protection Agency. Real Estate Disclosures About Potential Lead Hazards