Arizona Tax Guide 2025
Explore Arizona's 2025 state tax rates for income, sales, property, retirement, and more. Learn how Arizona compares nationwide.
Navigating the complexities of state taxes can be daunting, but understanding Arizona's tax landscape is essential for residents and newcomers alike.
In this guide, we'll explore key components of The Copper State's tax system, from income and sales taxes to property taxes and retirement benefits.
Arizona state tax: Overview
In Arizona, there is a flat income tax, which makes it easier to plan for. Property taxes and gas taxes are on the lower side compared to most states, and a significant perk for some is that Arizona doesn’t have an estate or inheritance tax.
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However, sales taxes in Arizona can be a bit higher than in other states. The average combined state and local sales tax rate is over 8%, so it’s something to keep in mind when making purchases.
In the News: Arizona renters will receive a gift of sorts this year: relief from residential rental taxes. As of January 1, 2025, due to a new law signed by Gov. Katie Hobbs, Arizonians will not have to pay this municipal tax on their monthly rent.
The change comes after rents have skyrocketed 72% in recent years, according to an Arizona State University report. Other data show that subsequent price increases have led to a state-wide housing shortage of 65,721 units — and counting.
For more information, see Arizona Rental Tax Repeal in 2025: What You Need to Know.
[Data for this state tax guide was gathered from a number of sources including the Census Bureau, the state’s government website, the Sales Tax Handbook, and the Tax Foundation. Property taxes are cited as a rate percentage rather than the assessed value.]
Arizona income tax rate
Arizona has a flat individual income tax rate of 2.5% that took effect in 2023.
However, Arizona's corporate tax rate is 4.9%.
Arizona retirement taxes
- Social Security: Arizona doesn't tax Social Security benefits.
- Up to $2,500 of income from the federal government, designated Arizona state government, and Arizona local government retirement plans are exempt from tax.
- 401(k) and IRA Distributions: Taxable
- Pensions: Most private, out-of-state, and federal pensions are subject to Arizona income tax. But Military pensions and Railroad Retirement benefits are fully exempt.
Arizona state sales tax
- Arizona's sales tax rate is 5.6%, with a combined state and local sales tax rate of 8.38%, according to the Tax Foundation.
- Groceries: Exempt from state tax, but local taxes may apply
- Clothing: Taxable
- Motor Vehicles: Taxable
- Prescription Drugs: Exempt
How much is property tax in Arizona?
In Arizona, the median property tax rate paid as a percentage is 0.45% according to the Tax Foundation.
Arizona Property Tax Breaks for Retirees
"Senior Freeze": Arizona offers what is called a Senior Valuation Protection Option, which is also known as a "Senior Freeze." This option freezes an eligible homeowner's property valuation if they apply and meet certain requirements.
The program is generally available if you are age 65 years or older. If approved, the valuation freeze last three years. It can also potentially be renewed after three years.
Arizona Property Tax Credit: Arizona offers a property tax credit against Arizona income taxes for homeowners or renters age 65 or older with a total household income less than $3,751 for seniors who live alone or less than $5,501 for older adults, age 65 or older, who live with someone.
Arizona gas tax
Gasoline: $0.18 per gallon.
Diesel: $0.26 per gallon.
Arizona taxes on alcohol and tobacco
Arizona tobacco taxes
Product | Tax Amount |
|---|---|
Cigarettes | $2 per pack of 20 cigarettes (.10 cents per cigarette) |
Cigars | $0.22 to $2.18 per ten cigars |
Medical Marijuana | 5.60% |
Recreational Marijuana | 21.60% (cannabis sales tax of 5.6% and a state excise tax of 16%) |
Source: Sales Tax Handbook
Arizona alcohol taxes
Product | Tax Amount |
|---|---|
Beer | $0.16 per gallon |
Wine | $0.84 per gallon |
Liquor | $3 per gallon |
Source: The Sales Tax Handbook
Arizona estate and inheritance taxes
Arizona doesn't have estate or inheritance taxes.
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