Arizona state tax rates are built around a flat 2.5% individual income tax, a state transaction privilege tax (the state’s version of a sales tax) that starts at 5% for retail sales, county-level property taxes that generally fall between about 0.4% and 1.5% of a home’s market value, and a 2.45% corporate income tax for taxable years beginning in 2026. Arizona charges no estate tax, no inheritance tax, and no state tax on Social Security benefits or military retirement pay.
Individual Income Tax: A Flat 2.5%
Arizona taxes individual income at a single rate of 2.5%, no matter how much you earn or how you file.1Arizona Legislature. Arizona Code 43-1011 – Taxes and Tax Rates The same rate applies to full-year residents, part-year residents, and nonresidents who earn income from Arizona sources. It replaced an older bracketed system that had topped out above 5%.
Your Arizona taxable income begins with your federal adjusted gross income. From there, state-specific additions, subtractions, deductions, and the standard or itemized deduction get you to the figure the 2.5% is actually applied to.
Income That Arizona Doesn’t Tax
Several categories of income are fully exempt from the 2.5% rate. If any portion of your Social Security benefits shows up in your federal adjusted gross income, you can subtract the whole amount on your Arizona return.2Arizona Legislature. Arizona Revised Statutes 43-1022 – Subtractions From Arizona Gross Income In practice, Social Security is untaxed at the state level regardless of your total income.
All military retirement pay is exempt as well. Active-duty military pay earned while stationed outside Arizona is generally not taxable by the state. These exemptions are a big part of why Arizona is a common landing spot for retirees and veterans.
Standard Deduction and Dependent Credit
The standard deduction trims the income the 2.5% rate applies to. For the 2025 tax year (filed in 2026), the amounts are:
- Single or married filing separately: $15,750
- Head of household: $23,625
- Married filing jointly: $31,500
Arizona doesn’t offer a traditional personal exemption. In its place is a dependent tax credit that reduces the tax itself: $100 for each dependent under 17, and $25 for each dependent 17 or older. The credit phases out once federal adjusted gross income passes $200,000 for single, married filing separately, and head of household filers, or $400,000 for joint filers.3Arizona Legislature. Arizona Revised Statutes 43-1073.01 – Dependent Tax Credit
Credits That Can Shrink the Bill Further
Arizona’s dollar-for-dollar credits are unusually generous relative to a 2.5% rate, and for many filers they can wipe out most or all of what’s owed.
Charitable and Foster Care Credits
Donations to Qualifying Charitable Organizations can be credited up to $506 for single, married filing separately, or head of household filers, and up to $1,009 for joint filers. A separate credit for Qualifying Foster Care Charitable Organizations goes up to $632 for single, married filing separately, or head of household filers, and up to $1,262 for joint filers.4State of Arizona State Employees Charitable Campaign. Tax Credit
School Credits
Contributions to certified school tuition organizations, which fund private school scholarships, qualify for a credit up to $787 for single or head of household filers and $1,570 for joint filers in 2026. A second “switcher” credit covers additional contributions up to $784 for single filers and $1,561 for joint filers.5Arizona Department of Revenue. Credits for Contributions to Certified School Tuition Organizations A separate public school credit covers contributions for extracurricular activities, capped at $200 for single filers and $400 for joint filers.
Sales Tax: The Transaction Privilege Tax
Arizona technically doesn’t have a sales tax. It has a Transaction Privilege Tax (TPT) imposed on businesses for the privilege of operating in the state. Businesses almost always pass the TPT on to customers as a line on the receipt, so from the buyer’s seat it works like a sales tax.
The state rate depends on the business classification. The one most shoppers encounter is retail, at 5%. Hotels and short-term lodging run 5.5%, mining is 3.125%, and commercial leases sit at 0%.6Arizona Legislature. Arizona Revised Statutes 42-5010 – Rates; Distribution Base An education surcharge rides on top of the base rate, and cities and counties layer on their own local taxes, so the total you see at checkout is typically higher than the state figure by itself.
Use Tax on Out-of-State Purchases
When an out-of-state seller doesn’t collect Arizona’s transaction privilege tax, you owe a use tax on the purchase at the same rate as the corresponding TPT.7Arizona Legislature. Arizona Revised Statutes 42-5155 You self-report it on your individual income tax return or pay it directly to the Department of Revenue.
Property Tax
Property taxes in Arizona are run at the county level and figured through a classification system that assigns different assessment ratios depending on how a property is used.8Arizona Legislature. Arizona Revised Statutes 42-11001 Owner-occupied residential property, for example, is assessed at 10% of its limited property value. Commercial and industrial properties have higher ratios. The county assessor sets the full cash value and applies the ratio to arrive at the assessed value.
Bills come in two parts. Primary taxes pay for basic operations of counties, cities, school districts, and community colleges. Secondary taxes fund voter-approved bonds, overrides, and special district levies. Effective rates vary across the state, generally landing between about 0.4% and 1.5% of a home’s market value depending on where you live and the local levies in place.
Payment is split into two installments. The first half is due October 1 and becomes delinquent after 5:00 p.m. on November 1. The second half is due March 1 and becomes delinquent after 5:00 p.m. on May 1. If your total bill is $100 or less, the whole amount is due October 1 and becomes delinquent after December 31.9Arizona Legislature. Arizona Revised Statutes 42-18052 – Due Dates and Times; Delinquency
Corporate Income Tax
Arizona taxes corporate net income at a flat rate too. For taxable years beginning in 2026, that rate is 2.45% on Arizona-source taxable income. The rate has been trending downward in recent years. S corporations, partnerships, and LLCs generally pass income through to their owners, who pay the 2.5% individual rate on it.
No Estate or Inheritance Tax
Arizona imposes no estate tax and no inheritance tax. Regardless of the size of the estate, heirs owe nothing to the state. Federal estate tax rules still apply on their own terms.
Filing, Deadlines, and What Late Costs
Individual returns are due April 15, the same day as the federal return. A six-month extension to file is available on request, but any tax owed still has to be paid by April 15 to avoid interest and penalties.
The form depends on your residency:
- Form 140 for full-year residents.
- Form 140PY for part-year residents.
- Form 140NR for nonresidents with Arizona-source income.
You can file and pay through AZTaxes.gov, or mail a paper return to the address in the form instructions. Payment is accepted by e-check or credit card online. Late payments accrue interest at the federal short-term rate plus 3%, compounded daily.10Internal Revenue Service. Topic No. 653, IRS Notices and Bills, Penalties and Interest Charges
If you file late without a valid extension, Arizona adds a penalty of 4.5% of the tax due for each month or partial month the return is overdue, capped at 25%.11Arizona Legislature. Arizona Revised Statutes 42-1125 – Civil Penalties; Definition The penalty can be waived if the delay was due to reasonable cause rather than willful neglect.
Estimated Tax Payments
Quarterly estimated payments are required if your Arizona gross income tops $75,000 ($150,000 for joint filers) in both the current year and the prior year.12Arizona Legislature. Arizona Revised Statutes 43-581 – Payment of Estimated Tax; Rules; Penalty; Forms The due dates line up with the federal estimated-payment schedule: typically April 15, June 15, September 15, and January 15 of the following year.
Your withholding and estimated payments together need to cover at least 90% of your current-year tax or 100% of your prior-year tax. No underpayment penalty applies if the total tax due on your return comes in under $1,000.12Arizona Legislature. Arizona Revised Statutes 43-581 – Payment of Estimated Tax; Rules; Penalty; Forms