Scottsdale, Arizona has no local income tax. No city or town in Arizona levies a municipal income tax, because the state has never granted cities that authority. If you live in Scottsdale, work in Scottsdale, or both, your paycheck will never show a Scottsdale withholding line. The only income taxes you owe are to the state of Arizona, at a flat 2.5% rate, and to the federal government.
Arizona’s Flat 2.5% State Income Tax
Arizona replaced its old bracket system with a single flat rate of 2.5% on all taxable income, effective for tax years 2023 and after.1Arizona Department of Revenue. Individual Income Tax Forms Calculating your state liability is straightforward: take your Arizona taxable income and multiply by 0.025.
The state uses your federal adjusted gross income as the starting point, then applies its own standard deduction. For 2026, that deduction is $15,750 for single filers and $31,500 for married couples filing jointly. Those same figures double as filing thresholds. If your gross income comes in below them, you generally don’t need to file an Arizona return at all.2Arizona Department of Revenue. Individual Income Tax Information
Residents file using Form 140, and the deadline mirrors the federal April 15 date. Miss it and the penalties stack quickly. Arizona charges a late-filing penalty of 4.5% of the tax owed for each month the return is overdue, plus a separate late-payment penalty of 0.5% per month on any unpaid balance.3Arizona Department of Revenue. Filing Notices of Penalties and Interest The two run simultaneously, so filing late and paying late means a combined 5% monthly charge until the caps kick in.
Federal Income Tax and the SALT Deduction
Federal tax sits on top of the 2.5% state rate. For 2026, federal rates run from 10% on the first $12,400 of taxable income for single filers up to 37% on income above $640,600. Married couples filing jointly hit the 37% bracket at $768,700.
The state and local tax deduction lets you write off your Arizona income tax and Scottsdale property tax on your federal return, subject to a cap. Under current law, that cap is $40,000 for most filers and increases by 1% annually. Filers with modified adjusted gross income above $500,000 see the cap phase down, though it cannot fall below $10,000. Because there is no city income tax, property tax is the main local piece of a Scottsdale resident’s SALT deduction.
Self-employed residents also owe federal self-employment tax at 15.3%, covering Social Security (12.4%) and Medicare (2.9%). The Social Security portion applies only to the first $184,500 of net self-employment earnings in 2026.4Social Security Administration. Contribution and Benefit Base Medicare has no cap, and Scottsdale adds no city-level self-employment tax.
How Scottsdale Funds Itself Instead
The city collects revenue through two main channels a resident actually feels: the transaction privilege tax on business activity and the property tax on real estate.
Transaction Privilege Tax
The transaction privilege tax functions like a sales tax at the register, though technically it’s a tax on the business for the privilege of operating in the city. As of July 2025, Scottsdale’s municipal TPT rate is 1.70% for most business categories, including retail sales and restaurants. Voters approved that rate through Proposition 490 in November 2024. Adding the state rate of 5.6% and Maricopa County’s 0.7%, the combined rate at checkout is 8.0% for most purchases.5City of Scottsdale. Taxes Hotels and short-term lodging carry an additional 5.0% city hotel tax, pushing that total to 13.97% once state and county pieces are included.6Arizona Department of Revenue. Scottsdale Transaction Privilege Tax and Use Tax Rates
Property Tax
Property taxes are calculated on assessed value, not income. The Maricopa County Treasurer bills and collects, then distributes Scottsdale’s share to fund services like police, fire, and parks. Scottsdale’s 2025–2026 combined city rate is $0.9124 per $100 of assessed value, split between a primary rate of $0.4891 for general operations and a secondary rate of $0.4233 for voter-approved bond debt.5City of Scottsdale. Taxes
Arizona assesses residential property at 10% of its full cash (market) value. On a home valued at $600,000, the assessed value is $60,000, and Scottsdale’s city portion of the tax runs roughly $548 per year.7Arizona Department of Revenue. Arizona Property Taxation The city rate is only one piece of the total bill. School districts, community college districts, and other special districts each add their own levy, so your total effective rate will be higher than the city portion alone.
The Bottom Line for Scottsdale Residents
A Scottsdale resident’s tax picture comes down to four items: federal income tax at graduated rates up to 37%, Arizona income tax at a flat 2.5%, property tax to Maricopa County that includes Scottsdale’s $0.9124 per $100 rate, and the 8.0% combined TPT built into everyday purchases. No city income tax is layered on top, which sets Scottsdale apart from cities in states like Ohio, Pennsylvania, and New York where municipal income taxes of 1% to 4% are common.
The absence changes take-home pay in a concrete way. A worker earning $100,000 in a city with a 2% local income tax hands over $2,000 a year that a Scottsdale worker keeps. The tradeoff is that the city leans on transaction privilege tax and property tax to fund services, so homeowners and consumers shoulder more of the load than renters and savers do.