Arizona State Tax Guide

Arizona state tax: Overview

Arizona has a flat income tax. Property taxes and taxes on gas in the Grand Canyon State are also on the low end. Arizona doesn't have an estate or inheritance tax, either.

Sales taxes are above average in Arizona compared to those in other states. The average combined (state and local) Arizona sales tax rate is over 8%. 

[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.] 

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Arizona income taxes

Arizona has a flat individual income tax rate of 2.5% that took effect in 2023.

• Arizona's corporate tax rate is 4.9%.
• 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. 
• Military pensions and Railroad Retirement benefits are fully exempt.

Arizona sales tax

• Arizona's sales tax rate is 5.6%.
• Arizona's local sales tax rate is capped at 5.3%, according to the Tax Foundation. That is a combined average state and local sales tax rate of 8.37%.
• The average Arizona local sales tax rate however is about 2.7%.

• Groceries: Exempt from state tax, but local taxes may apply
• Clothing: Taxable
• Motor Vehicles: Taxable
• Prescription Drugs: Not Taxable

How much is property tax in Arizona?

In Arizona, the median property tax rate paid as a percentage is .63% 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 motor ruel (gas) taxes

Gasoline: 18 cents per gallon.

Diesel: Diesel is taxed at two rates in Arizona. The tax is generally 26 cents per gallon, but it is 18 cents per gallon for light vehicles like pickup trucks.

Arizona taxes on alcohol and tobacco

Cigarettes: $2 per pack of 20 cigarettes (.10 cents per cigarette).

Snuff, fine-cut chewing, and smoking tobacco: $0.22 per ounce

Plug or twist chewing tobacco: $0.05 per ounce

Cigars: $0.218 to $2.20 per ten cigars

Source: Arizona Dept. of Revenue

Source: The Sales Tax Handbook

Marijuana: For adult use (recreational marijuana) Arizona has a 16% excise tax on retail sales of marijuana, plus state and local sales tax.

Arizona estate and inheritance taxes

Arizona doesn't have estate or inheritance taxes.

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