Arizona taxes personal income at a flat 2.5%, corporate income at 4.9%, and retail sales through a transaction privilege tax that starts at 5.6% before city and county add-ons push most combined rates between 7% and 10%. Property tax is handled at the county level, vehicles carry an annual license tax tied to depreciated value, and the state imposes no estate or inheritance tax. Here is how each piece works and when payment is due.
Individual Income Tax
Arizona applies a single flat rate of 2.5% to taxable income, regardless of how much you earn or how you file.1Arizona Department of Revenue. Individual Income Tax Highlights There are no brackets and no surcharges on higher earners. Full-year residents owe tax on income from every source. Part-year residents are taxed only on income earned during the months they lived in Arizona, and nonresidents file only if they earned income from Arizona sources, such as wages from an Arizona employer or rent from Arizona property.2Arizona Department of Revenue. Individual Income Tax Information
Residency turns on where your permanent home is and your intent to keep it there. If you leave the state temporarily for work or travel, you remain a resident as long as you plan to return.2Arizona Department of Revenue. Individual Income Tax Information
Before the 2.5% rate applies, you reduce gross income with a standard deduction. For the 2025 tax year:
- Single or married filing separately: $15,750
- Married filing jointly: $31,500
- Head of household: $23,625
These amounts come from the Arizona Department of Revenue and are adjusted periodically.1Arizona Department of Revenue. Individual Income Tax Highlights You can itemize on your state return even if you take the standard deduction federally, which can help when state-deductible expenses do not clear the federal threshold.
Military Pay
Arizona fully exempts military retired pay, including survivor benefit annuities, from state income tax. Active duty and reserve pay are also excluded.3Arizona Legislature. Arizona Code 43-1022 – Subtractions From Arizona Gross Income
Tax Credits That Reduce What You Owe
The dependent tax credit is $100 per dependent under 17 and $25 per dependent 17 or older. It phases out starting at $200,000 in federal adjusted gross income for single filers and $400,000 for joint filers, shrinking by 5% for each $1,000 above those thresholds.4Arizona Legislature. Arizona Code 43-1073.01 – Dependent Tax Credit
Two donation-based credits are worth knowing about. For 2026, contributions to qualifying charitable organizations (QCOs) generate a credit of up to $506 for single filers and $1,009 for married couples filing jointly. Contributions to qualifying foster care charitable organizations (QFCOs) allow up to $632 for single filers and $1,262 for joint filers.5Arizona Department of Revenue. Credits for Contributions to QCOs and QFCOs Donations made between January 1 and April 15 can be claimed on either that year’s return or the prior year’s.
Corporate Income Tax
C corporations doing business in Arizona pay a flat 4.9% on Arizona taxable income, with a $50 minimum regardless of profitability.6Arizona Legislature. Arizona Code 43-1111 – Tax Rates for Corporations S corporations and partnerships pass income through to their owners’ individual returns, so the 4.9% rate mostly matters for traditional C corporations.
Sales Tax (Transaction Privilege Tax)
What most people call “sales tax” in Arizona is legally a transaction privilege tax (TPT). It is technically a tax on the business for the privilege of operating in the state, not on your purchase. In practice, businesses pass it through to buyers.
The state TPT rate for retail sales is 5.6%. Counties and cities layer their own rates on top, so what you actually pay depends on where the transaction happens.7Arizona Department of Revenue. Transaction Privilege Tax Combined rates typically fall between 7% and 10%, with some locations above 11%.8Arizona Department of Revenue. Arizona State, County and City Transaction Privilege and Other Tax Rate Tables
What’s Exempt
Groceries purchased for home consumption are exempt from state TPT, though prepared restaurant food is taxable. Other exemptions include prescription drugs, medical oxygen, prosthetic devices, insulin and glucose test strips, durable medical equipment, hearing aids, prescription eyeglasses and contact lenses, and textbooks required by a state university or community college.9Arizona Legislature. Arizona Code 42-5061 – Retail Classification
Use Tax on Out-of-State Purchases
Buy something from an out-of-state seller who does not charge Arizona TPT, and you owe use tax at the same 5.6% state rate plus any local rates. This comes up most often with online purchases. Casual sales between individuals, prescription medicines, and most groceries are exempt.10Arizona Department of Revenue. Understanding Use Tax Use tax gets remitted directly to the Arizona Department of Revenue.
Property Tax
Property taxes are assessed and collected by counties, not the state. Every parcel gets two valuations. Full Cash Value (FCV) reflects current market value. Limited Property Value (LPV) is the figure used to calculate your primary tax bill, and it can grow by no more than 5% per year and never exceed the FCV.11Arizona Department of Revenue. Limited Property Value Even in a hot market, the taxable value for your primary levy stays on a slower track.
The county multiplies the LPV by an assessment ratio to reach the assessed value that the tax rate hits. For owner-occupied homes (Class 3 property), the ratio is 10%. A home with an LPV of $300,000 has an assessed value of $30,000.12Arizona Department of Revenue. Arizona Property Taxation
Payments come in two installments. The first half is due October 1 and becomes delinquent after November 1 at 5:00 p.m. The second half is due March 1 of the following year and becomes delinquent after May 1 at 5:00 p.m.13Arizona Legislature. Arizona Code 42-18052 – Due Dates and Times; Delinquency
Exemptions for Seniors, Widows, and Disabled Residents
Arizona offers a property tax exemption for widows, widowers, and people with a total and permanent disability. It reduces the assessed value by $4,188 and does not apply if the total assessment exceeds $28,459; both figures are adjusted annually for inflation. Household income in the prior year cannot exceed $34,901 (or $41,870 if a child under 18 lives with you). Social Security, workers’ compensation, and veterans’ pensions do not count toward that limit.14Arizona Legislature. Arizona Code 42-11111 – Exemption for Property; Widows and Widowers; Persons With a Total and Permanent Disability; Veterans With a Disability You claim it by filing an affidavit with your county assessor.
Homeowners 65 and older can also apply for the Senior Property Valuation Protection Option, which freezes the assessed value of a primary residence. You need at least two years in the home, must meet income limits, and must file with your county assessor by September 1.15Arizona Department of Revenue. Senior Property Valuation Protection Option The value stays locked until you sell or otherwise become ineligible.
Vehicle License Tax
Arizona does not charge a traditional personal property tax on vehicles. Instead, a Vehicle License Tax (VLT) applies each year when you renew registration. The assessed value starts at 60% of the manufacturer’s base retail price in year one and drops 16.25% every year after. The rate is $2.80 per $100 of assessed value the first year and $2.89 per $100 in each following year.16Arizona Joint Legislative Budget Committee. Vehicle License Tax On a new car with a $35,000 base price, the first-year VLT works out to roughly $588 and declines from there.
No Estate or Inheritance Tax
Arizona has no state-level estate or inheritance tax. Heirs receive assets without any Arizona tax on the transfer. Federal estate tax may still reach very large estates, but Arizona adds nothing to it.
Filing Deadlines and Penalties
Individual income tax returns are due April 15, matching the federal deadline. An automatic extension pushes the filing deadline to October 15, but it only extends paperwork. Any tax owed is still due April 15, and interest accrues on unpaid balances from that date.17Arizona Department of Revenue. Extension Deadline Approaching for Arizona Individual Income Tax Filers Electronic filing through AZTaxes.gov or commercial software is the fastest route.
Quarterly estimated payments are required from individuals whose Arizona gross income tops $75,000 ($150,000 for joint filers) in both the current and prior tax year. Installments are due April 15, June 15, September 15, and January 15 of the following year. To avoid an underpayment penalty, payments must cover at least 90% of the current year’s tax or 100% of the prior year’s liability.18Arizona Legislature. Arizona Code 43-581 – Payment of Estimated Tax; Rules; Penalty; Forms
File late and Arizona charges 4.5% of the unpaid tax for each month or partial month the return is overdue.19Arizona Department of Revenue. Filing Notices of Penalties and Interest That adds up quickly. Filing on time with a partial payment almost always beats filing late, because the late-filing penalty runs well above the interest on an unpaid balance.