Does Arizona Have a Real Estate Transfer Tax?

Arizona does not have a real estate transfer tax. A 2008 constitutional amendment blocks the state and every local government from creating one, so sellers and buyers avoid the percentage-based charge that adds thousands of dollars to closings in many other states. A small flat fee of $2 per deed still applies, and federal taxes on the sale itself are untouched by state law.

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. Undoing it would take another constitutional amendment placed on the ballot and approved by voters at a general election. That makes Arizona’s transfer-tax-free status unusually durable compared with states where a legislative majority could raise or reinstate the tax in a single session.

The $2 Flat Fee That Still Applies

Arizona is not entirely 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 The charge predates Proposition 100, and the constitutional ban only reaches taxes and fees created after 2007, so it was grandfathered in. It usually shows up folded into the total recording charges on the closing statement rather than as its own line item.

Standard recording fees are separate from the $2 charge and vary by county. Neither has anything to do with the sale price, so the total does not scale with the value of the property.

The Affidavit of Property Value

Every deed or sales contract filed for recording has to include an affidavit of property value (sometimes called the affidavit of legal value). Under ARS 11-1133, the buyer and seller, or their agents, jointly certify details about the transaction on a form approved by the Arizona Department of Revenue.³ The form is available from the Department of Revenue’s website.⁴

The affidavit captures:

Sale price, cash down payment, and whether financing involved a new third-party loan, seller financing, assumption, or a property exchange.
Full legal description, situs address, and the assessor’s parcel number.
Names and addresses of buyer and seller, any relationship between them, and the conditions of the transaction.
A 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 bounced at the counter.

Transfers Exempt From the Fee and Affidavit

ARS 11-1134 lists transfers that skip both the $2 fee and the affidavit. The deed still needs to be recorded, but the exemption code goes on the instrument in place of the 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 also exempt regardless of family relationship. What matters 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 reaches divorce-related property divisions and most probate distributions. Transfers between a person and a trustee, or from a trustee to a trust beneficiary, are exempt when only nominal consideration is involved. Beneficiary deeds, where property passes automatically at death, also qualify.⁵

Business Entity Transfers

Transfers between related business entities for no real consideration are exempt across a wide range of structures: parent to subsidiary and subsidiary to parent, transfers between commonly controlled entities, members and their LLCs, partners and their partnerships, joint venturers and their joint ventures, and transfers to a single-purpose entity created to obtain financing. Transfers pursuant to a merger are exempt as well.⁵

Other Exempt Instruments

Additional exempt categories include 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 that correct or confirm a previously recorded deed, transfers solely 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 Still Apply to the Sale

No state transfer tax does not mean a tax-free sale. Federal obligations continue to run alongside the transaction, and for most sellers they are the larger number by far.

Capital Gains on the Profit

Under 26 U.S.C. § 121, a seller can exclude up to $250,000 of gain if single, or up to $500,000 if filing jointly, provided two tests are met: the seller owned the home for at least two of the five years before the sale, and used it as a 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 The exclusion also cannot have been claimed on another home sale within the prior two years. Gain above the exclusion is taxed at federal capital gains rates, a real concern for 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 U.S. real property, the buyer must withhold 15% of the gross sale price and remit it to the IRS as a prepayment toward the seller’s tax liability.⁸ Two reductions apply when the buyer intends to use the property as a personal residence:

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 a deposit, not a final bill. If the seller’s actual liability is lower, a U.S. tax return can recover the difference.

Gift Tax on Below-Market Family Transfers

Family transfers that qualify for the Arizona recording exemption can still trigger federal gift tax paperwork. When property changes hands for less than fair market value, the IRS treats the difference as a gift. For 2026, the annual exclusion is $19,000 per recipient, and married couples who elect to split gifts can give $38,000 per recipient without filing a return or reducing the lifetime exemption.⁹

Since most homes are worth far more than $19,000, gifting a house typically means filing IRS Form 709 and drawing against the lifetime exemption, which is $15,000,000 per person for 2026.¹⁰ No gift tax is owed until cumulative lifetime gifts exceed that threshold, so most families never cut a check. But the return still has to be filed.

Form 1099-S Reporting

Most sales trigger a federal reporting requirement on Form 1099-S, which reports the seller’s gross proceeds. The person responsible for closing the transaction, typically the title company, escrow agent, or settlement attorney listed on the closing disclosure, files the form.¹¹ If no closing agent is involved, responsibility falls 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 exclusion can certify in writing to the closing agent that the sale meets the requirements, which may relieve the filer of the 1099-S obligation for that transaction. A 1099-S being issued does not by itself mean tax is owed. It means the IRS is aware of the sale and will expect to see it addressed on the return.

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