Ocity Logo ocity
Official Tax Guide

Arizona Taxes 2025: Income, Sales, and Property Tax Guide

Complete guide to Arizona state taxes. Income tax (2.5% (Flat)), sales tax, and what you need to know before moving.

Updated January 15, 2026
5 min read

Arizona State Tax Guide 2025

Welcome to Arizona! As you prepare for your move to the Grand Canyon State, understanding the local tax landscape is essential for financial planning. Arizona offers a relatively tax-friendly environment, particularly regarding income tax, but it varies by jurisdiction.

This guide provides a general overview of Arizona’s tax structure for the 2025 tax year.

1. Income Tax

Arizona has transitioned to a flat tax system, simplifying the filing process for residents.

  • Tax Rate: 2.5% (Flat rate).
  • Structure: Flat. As of recent legislation, all taxable income is subject to the same 2.5% rate, regardless of income bracket.
  • Standard Deduction: Arizona allows taxpayers to claim a standard deduction, which adjusts annually for inflation. For 2025, expect the standard deduction to be approximately:
    • Single: ~$14,000 (estimated)
    • Married Filing Jointly: ~$28,000 (estimated)
    • Note: These figures are estimates based on historical adjustments; verify current amounts with the Arizona Department of Revenue.
  • Filing: Residents file Arizona Form 140. The state generally conforms to federal definitions of taxable income, making the transition from federal to state calculations relatively straightforward.

2. Sales Tax

Sales tax in Arizona is a combination of state and local rates.

  • State Rate: 5.6%.
  • Local Taxes: Cities and counties add their own sales taxes. In total, combined rates typically range from 7.6% to 11.2% depending on the location.
    • Example: Phoenix and Tucson have specific local rates that, when added to the state rate, result in higher total percentages.
  • Use Tax: If you purchase items online from out-of-state retailers that do not collect Arizona sales tax, you are required to pay a "use tax" at the same rate as your local sales tax when filing your state income taxes.

3. Property Tax

Arizona property taxes are generally lower than the national average, making it attractive for homeowners.

  • Overview: Arizona property taxes are calculated based on the assessed value of the property, not the market value.
  • Assessment Ratio:
    • Residential properties are assessed at 10% of their limited property value (assessed value).
    • Commercial properties are assessed at 25%.
  • Tax Rates: While specific rates vary by county and school district, the effective property tax rate in Arizona is often cited between 0.40% and 0.60% of the home's market value.
  • Proposition 130: Arizona offers property tax relief for seniors (age 65+) and disabled individuals through the Senior Property Valuation Protection Option (Senior Freeze), which freezes the limited property value for tax purposes.

4. Other Taxes

Beyond income and sales, Arizona has specific taxes on fuel and certain goods.

  • Gas Tax:
    • Gasoline: ~19.0 cents per gallon.
    • Diesel: ~19.0 cents per gallon.
    • Note: These rates are subject to adjustment by the state legislature.
  • "Sin" Taxes: Arizona imposes excise taxes on specific goods:
    • Cigarettes: Approximately $2.00 per pack.
    • Alcohol: Rates vary by type (beer, wine, spirits) and are generally moderate compared to national averages.
  • Inheritance/Estate Tax: Arizona does not have a state-level inheritance or estate tax. However, federal estate tax laws still apply to large estates.
  • Vehicle Registration: Registration fees are based on the assessed value of the vehicle and include various license fees. These can be significant, particularly for newer vehicles.

5. Retiree Taxes

Arizona is generally considered tax-friendly for retirees, though specific rules apply.

  • Social Security: Social Security benefits are not taxed by the state of Arizona.
  • Retirement Income (401k/IRA/Pensions): A portion of retirement income is exempt from state taxation. Arizona allows a deduction of up to $2,500 per person (or $5,000 for married filing jointly) for retirement income received from pensions, annuities, and individual retirement plans.
  • RMDs: Required Minimum Distributions (RMDs) from retirement accounts generally qualify for this deduction.
  • Property Tax Relief: As mentioned, seniors may qualify for the Senior Freeze to limit property tax increases.

6. Comparison to Neighbors

How does Arizona stack up against its neighbors?

  • California: Arizona is significantly more tax-friendly. California has a progressive income tax system with rates up to 13.3%, whereas Arizona has a flat 2.5%. Sales and property taxes in Arizona are generally lower than in California.
  • New Mexico: New Mexico has a progressive income tax (rates range from 1.7% to 5.9%). Arizona’s flat 2.5% rate is generally more favorable for middle-to-high-income earners. However, New Mexico has a lower average sales tax rate (approx. 5.1% state + local).
  • Nevada: Nevada has no state income tax, making it more attractive for high earners than Arizona. However, Nevada’s sales tax rates are generally higher, and property taxes may be slightly higher depending on the county.
  • Utah: Utah has a flat income tax rate of 4.55%, which is higher than Arizona’s 2.5%. Sales and property tax rates are comparable between the two states.

Disclaimer

Tax laws change frequently. The information provided in this guide is for general informational purposes only and is based on 2025 tax data. It is not a substitute for professional tax advice. Consult a Certified Public Accountant (CPA) or tax professional regarding your specific financial situation.