Bottom Line
Middle-Class Families: Most Tax-Friendly (Go to the Kiplinger Tax Map for Middle-Class Families)
Retirees: Most Tax-Friendly (Go to the Kiplinger Tax Map for Retirees)
Sunshine, sunshine, sunshine — and low taxes. While the Grand Canyon State does have an income tax, the rates are notably low. Property taxes and taxes on gasoline are on the low end, too. Arizona doesn't have an estate or inheritance tax, either.
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Sales taxes are above average in Arizona, though. The average combined (state and local) rate is 8.37%, which is the 11th-highest in the nation. But that's not enough to outweigh the state's other low taxes.
Arizona Income Taxes
Arizona Income Tax Range
Low: 2.55% (on up to $57,305 of taxable income for married filers and up to $28,653 for single filers)
High: 2.98% (on over $57,305 of taxable income for joint filers and over $28,653 of taxable income for single filers)
Beginning in 2023, a flat rate of 2.5% applies.
Arizona Taxation of Social Security Benefits
Social Security benefits are not taxed by the state.
Arizona Tax Breaks for Other Retirement Income
Up to $2,500 of income from federal government, designated Arizona state government, and Arizona local government retirement plans is exempt.
Military pensions and Railroad Retirement benefits are fully exempt.
Arizona Sales Tax
5.6% state levy. Localities can add as much as 5.3% to that, but the average combined levy is 8.37%, according to the Tax Foundation.
- Groceries: Exempt from state tax, but local taxes may apply
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
Arizona Real Property Taxes
In Arizona, the median property tax rate is $508 per $100,000 of assessed home value.
Arizona Property Tax Breaks for Retirees
Homeowners who are at least 65 years old, have lived in their primary residence for at least two years and fall below certain income limits (for the 2023 program, one owner of a property must have total income of $43,872 or less, and multiple owners of a property must have combined income of $54,840 or less) can have the valuation of their property frozen for three years. The freeze can be renewed every third year.
Homeowners who are at least 70 years old, have either resided in their primary residence for at least six years or have lived in the state for at least 10 years, and do not receive more than $10,000 of taxable income per year can defer their property taxes.
A property tax refund credit of up to $502 is available against Arizona income taxes for homeowners or renters age 65 or older with total household income less than $3,751 for seniors who live alone or less than $5,501 for seniors who live with someone.
Arizona Motor Fuel Taxes
Gasoline: 19¢ per gallon.
Diesel: 27¢ per gallon (19¢ per gallon for light vehicles like pickup trucks).
Arizona Sin Taxes
Cigarettes: $2 per pack.
Snuff, fine-cut chewing and smoking tobacco: $0.23 per ounce
Plug or twist chewing tobacco: $0.06 per ounce
Cigars: $0.22 to $2.20 per ten cigars
Beer: $0.16 per gallon
Wine: $0.84 per gallon
Liquor: $3 per gallon
Marijuana: 16% excise tax, plus state and local sales tax
Arizona Estate and Inheritance Taxes
No estate or inheritance tax.
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