Arizona collects state income tax on wages, investment income, and business profits

Yes, Arizona has a state income tax. The state taxes income from wages, self-employment, interest, dividends, capital gains, and retirement distributions. Arizona's tax rates range from 2.55% to 4.5% depending on your income level and filing status. Unlike some states that tax only certain types of income, Arizona taxes most forms of personal income the same way the federal government does.

Arizona is not a no-income-tax state like Florida, Texas, or Nevada. If you live in Arizona or work there and earn income, you will owe state income tax on that money unless a specific exemption applies to your situation.

Key Takeaways

  • Arizona's state income tax rates are 2.55%, 3.34%, 4.17%, and 4.5%, with the rate depending on your total income and whether you file single or married.
  • You pay Arizona state income tax on wages, self-employment income, retirement account withdrawals, investment income, and most other forms of personal income.
  • Arizona residents file state taxes using Form 140 (single filers) or Form 140-PZ (married filing jointly), separate from federal tax returns.
  • Some income types are exempt from Arizona state tax, including certain military pay, federal employee pensions under specific conditions, and Social Security benefits.

Arizona's tax brackets and rates for 2024

Arizona uses a progressive tax system with four tax brackets. Your rate depends on your taxable income and filing status. The state publishes updated brackets each year; the 2024 rates are the most recent available, but rates and brackets change annually.

For single filers in 2024, the brackets are roughly: 2.55% on income up to $31,000; 3.34% from $31,001 to $75,000; 4.17% from $75,001 to $250,000; and 4.5% on income over $250,000. For married couples filing jointly, the income thresholds are higher. Arizona's Department of Revenue publishes the exact brackets each January on its website, and tax software automatically applies the current year's rates when you file.

Your Arizona taxable income is not the same as your federal taxable income. Arizona starts with your federal adjusted gross income but makes its own adjustments, additions, and subtractions. For example, Arizona does not allow the federal standard deduction; instead, it has its own Arizona standard deduction, which is lower than the federal amount.

Types of income subject to Arizona state tax

Arizona taxes wages and salaries from employment, self-employment income from a business or freelance work, interest and dividends from investments, capital gains from selling stocks or property, distributions from retirement accounts like IRAs and 401(k)s, rental income, and income from partnerships or S corporations.

Retirement account withdrawals are taxed as ordinary income in Arizona. If you withdraw money from a traditional IRA or 401(k), that withdrawal counts as Arizona taxable income in the year you take it. Roth IRA withdrawals are not taxed because you already paid tax on the money when you contributed it, but the earnings portion of a Roth conversion may be taxable in Arizona depending on the timing and your other income.

Social Security benefits are not taxed by Arizona, even though they may be taxable at the federal level. Military retirement pay is also exempt from Arizona state tax. Federal employee pensions are exempt under certain conditions related to when the employee started work.

How to file Arizona state income tax

Arizona residents file state income tax using Form 140 (for single filers) or Form 140-PZ (for married couples filing jointly). These forms are separate from your federal tax return. You file them with the Arizona Department of Revenue, either by mail or electronically through the department's website or through tax software that supports Arizona filing.

The filing important date for Arizona state taxes is the same as the federal important date: April 15 of the following year, unless that date falls on a weekend or holiday. If you file a federal extension, your Arizona extension is automatic — you have until October 15 to file.

You can file Arizona taxes yourself using the department's free software, through commercial tax software that includes Arizona, or by hiring a tax preparer. The Arizona Department of Revenue also offers free filing through the IRS Free File program if your income is below a certain threshold.

Income types exempt from Arizona state tax

Social Security benefits are completely exempt from Arizona state income tax. This applies whether you receive Social Security as a retiree, survivor, or disabled worker. You do not report Social Security on your Arizona return even if you report it on your federal return.

Military retirement pay is exempt from Arizona state tax. This includes retirement pay from the U.S. Army, Navy, Air Force, Marines, Coast Guard, and Space Force. Federal employee pensions are exempt if the employee first became a federal employee before January 1, 2013. If the employee started after that date, the pension is taxable in Arizona.

Certain other income sources may be exempt or partially exempt depending on your situation. These include some types of disability income, certain scholarships and educational grants, and income from specific state bonds. The Arizona Department of Revenue publishes a complete list of exemptions on its website.

Withholding and estimated tax payments

If you are employed, your employer withholds Arizona state income tax from your paycheck along with federal and Social Security taxes. You tell your employer how much to withhold by completing an Arizona Form W-4, which is separate from your federal W-4. If you do not complete an Arizona W-4, your employer will withhold at a default rate.

If you are self-employed or have income that is not subject to withholding, you may need to make quarterly estimated tax payments to Arizona. These payments are due on the 15th of April, June, September, and January. If you underpay throughout the year, you may owe a penalty when you file, even if you get a refund overall.

You can adjust your withholding at any time by submitting a new Arizona Form W-4 to your employer. If you expect a large refund, you may want to increase your withholding. If you expect to owe money, you may want to decrease your withholding or make estimated payments.

Frequently Asked Questions

Do I have to pay Arizona income tax if I work in Arizona but live in another state?

Yes, you owe Arizona state income tax on income you earn in Arizona, even if you live elsewhere. Arizona taxes income based on where the work is performed, not where you live. You may also owe tax to your home state, depending on that state's rules. Some states have reciprocal agreements that prevent double taxation, but you should check with both states' tax departments to understand your obligation.

Is Social Security taxed in Arizona?

No. Arizona does not tax Social Security benefits at the state level. You do not include Social Security income on your Arizona tax return. However, Social Security may still be taxable at the federal level depending on your total income, so you will still report it on your federal return.

What is the difference between Arizona's standard deduction and the federal standard deduction?

Arizona's standard deduction is lower than the federal standard deduction. For 2024, the Arizona standard deduction for a single filer is $14,800, while the federal standard deduction is $13,850. Arizona adjusts its standard deduction each year for inflation. You use the Arizona standard deduction on your state return and the federal standard deduction on your federal return.

Do I need to file an Arizona tax return if I only have Social Security income?

No. If your only income is Social Security, you do not need to file an Arizona state tax return because Social Security is not taxable in Arizona. However, you may still need to file a federal return depending on your total income and filing status, so check the IRS requirements separately.

Can I get a refund of Arizona state income tax?

Yes. If you overpaid Arizona state income tax through withholding or estimated payments, you will receive a refund when you file your return. Arizona processes refunds through direct deposit or check. The time to receive a refund varies but typically takes several weeks after the state receives and processes your return.