Arizona taxes income at a flat 2.5%, the state sales tax (TPT) rate is 5.6% before local add-ons, and the average effective property tax rate is about 0.48%, one of the lowest in the country. There's no single "Arizona tax rate," because income, sales, and property are taxed by entirely different systems, each with its own rate structure. Here's the full breakdown of each, plus where the rate actually lands depending on your city and county.

Key Takeaways

• Arizona's individual income tax rate is a flat 2.5% on all taxable income, regardless of filing status, effective since tax year 2023.
• Arizona's corporate income tax rate is 4.9%, with a $50 minimum tax.
• The state sales tax (TPT) rate is 5.6%, but the average combined state and local rate is 8.52%, and can run as high as roughly 11.2% depending on city and county.
• The average effective property tax rate is 0.48%, ranking Arizona 46th out of 50 states, meaning among the lowest nationally.
• Arizona allows a 100% deduction for medical expenses on the state return, with no equivalent to the federal 7.5%-of-AGI floor, a genuine difference from your federal itemized deduction.
• Social Security benefits and military retirement pay are fully exempt from Arizona income tax, and the state has no estate or inheritance tax.

Arizona's Income Tax Rate

Arizona taxes residents on the same income reported for federal purposes, subject to specific state modifications. Arizona taxes individual income at a flat 2.5%, applied equally to every filer regardless of income level or filing status (single, married filing jointly, married filing separately, or head of household). This wasn't always the case. Through 2021, Arizona used a four-bracket graduated system with a top rate of 4.5%. Senate Bill 1828, signed by Governor Ducey on June 30, 2021, collapsed those brackets to two for tax year 2022 and set a flat 2.5% rate to take effect once state revenue crossed a statutory trigger. That trigger was met in September 2022, but not before a legal fight over whether voters could block it by referendum; the Arizona Supreme Court ultimately ruled the flat-tax provisions weren't subject to a public vote, clearing the way for it to take effect. The flat rate has applied to all tax years beginning January 1, 2023.

For businesses organized as C-corporations, Arizona's corporate income tax rate is 4.9% of Arizona taxable income, with a $50 minimum tax regardless of profitability. Pass-through entities (S-corps, partnerships, most LLCs) don't pay this rate directly; income flows to the owners' individual returns and is taxed at the 2.5% individual rate instead.

Arizona's Sales Tax (TPT) Rate

What most people call "sales tax" in Arizona is technically the Transaction Privilege Tax (TPT), a tax on the seller for the privilege of doing business, though it's typically passed to the buyer at checkout and looks identical to a sales tax on your receipt.

The state-level TPT rate is 5.6%. On top of that, counties and cities layer their own rates, and the combined total varies significantly by location:

• Statewide average combined rate: 8.52%
• Phoenix: approximately 9.1% combined (state, Maricopa County, and city rate)
• Range across the state: roughly 5.6% to 11.2%, depending on the specific city and county

Because rates vary down to the exact address, not just the city or ZIP code, the Arizona Department of Revenue's address-based rate lookup tool is the only reliable way to confirm the exact combined rate for a specific transaction location. ADOR also publishes an updated monthly rate table covering every jurisdiction in the state, since cities and counties change rates throughout the year.

Arizona's Property Tax Rate

Arizona's average effective property tax rate is approximately 0.48%, ranking the state 46th out of 50, meaning only four states have lower typical property tax burdens. Property tax here works differently than income or sales tax: there's no single statewide rate. Instead, each county, school district, and special district sets its own rate, and your bill depends on where the property sits.

Two structural features keep Arizona's property taxes comparatively low:

• Limited Property Value (LPV). Your tax bill is based on LPV, not full market value, and under Proposition 117 (2012), LPV can't increase by more than 5% in a single year, even if the market value jumps more.
• Assessment ratio. Residential property is assessed at 10% of its LPV before any rate is applied, which substantially shrinks the taxable base compared to using full value.

Effective rates vary by county. Rural counties like Greenlee tend to carry among the lowest property tax burdens in the state, while more urbanized counties like Pima and Maricopa run higher due to greater service and infrastructure demands.

Other Arizona Taxes That Affect Your Overall Rate

A few additional rules matter more than the headline percentages once you're planning around actual dollars:

• Social Security benefits: fully exempt from Arizona income tax.
• Military retirement pay: fully exempt from Arizona income tax.
• Capital gains: Arizona allows a subtraction of 25% of net long-term capital gains included in federal adjusted gross income, which brings the effective state rate on those gains down to roughly 1.875% instead of the full 2.5%.
• No estate tax, no inheritance tax, no gift tax at the state level.

Is Arizona a Tax-Friendly State?

By most measures, yes, relative to the national average. The Tax Foundation ranks Arizona 14th overall on its 2026 State Tax Competitiveness Index. The state combines a low flat income tax, a below-average effective property tax rate, and no estate tax, though its combined sales tax rate (8.52% average) runs above the national median. Arizona isn't a zero-income-tax state like Texas, Florida, or Nevada, but its 2.5% flat rate is among the lowest of any state that does levy an income tax.

How Much Is $100,000 a Year After Taxes in Arizona?

The exact number depends on filing status, deductions, and withholding, but here's the shape of it for a single filer taking the standard deduction, using 2026 figures. Start with $100,000 in W-2 wages. The federal standard deduction ($16,100) brings taxable income down to $83,900. That produces roughly $13,270 in federal income tax and about $7,650 in FICA (7.65%). Arizona's flat rate applies to that same $83,900, adding about $2,100. Total tax burden lands around $23,000, leaving approximately $77,000 in take-home pay.

Arizona's piece of that math is small next to the federal side. That's the advantage of a flat rate: multiply your Arizona taxable income by 2.5% and you're done, no brackets to navigate.

Are Medical Expenses Deductible in Arizona?

Yes, and more generously than on your federal return. On your federal Schedule A, you can only deduct unreimbursed medical and dental expenses that exceed 7.5% of your adjusted gross income. Arizona's Form 140 Schedule A instructions require you to add back the portion of your medical expenses that the federal floor disallowed, meaning Arizona effectively allows a deduction for 100% of qualified medical expenses, with no AGI floor at the state level. You still have to itemize on your Arizona return, and you have to complete a federal Schedule A first even if you take the federal standard deduction. But the medical expense treatment itself is a real, often-overlooked difference between the two returns.

Why These Rates Matter More for Business Owners, Real Estate Investors, and High Earners

• The flat income tax rewards income timing less than a graduated system would, but it also means there's no bracket to manage down into, so most of the planning opportunity shifts to credits, entity structure, and deduction timing rather than rate arbitrage. Arizona's charitable and school tax credits are a direct, no-cost way to redirect part of that 2.5% liability; see our full breakdown in Arizona Tax Credits.
• Real estate investors should factor property tax variance into acquisition decisions. A rental property's effective county and district rate can meaningfully affect net cash flow, and it's worth checking before closing, not after. Selling later brings its own tax layer; see the tax consequences of selling a rental property.
• High earners moving to Arizona or comparing states should weigh sales tax against income tax. Arizona's combined TPT rate is higher than several no-income-tax states', but its flat 2.5% income tax and lack of estate tax often outweigh that for anyone earning substantially more than they spend on taxable goods. Our piece on why high earners often overpay their taxes covers the planning side of that equation.
• Business owners should confirm their entity's actual rate exposure. A flat 2.5% individual rate and a 4.9% corporate rate are very different numbers, and the right structure depends on more than the headline rate; see tax planning versus tax preparation for high-income earners for how that decision gets made properly.

The Bottom Line on Arizona's Tax Rates

Arizona's tax rate isn't one number. It's a flat 2.5% on income, 4.9% on corporate income, a 5.6% state sales tax that stacks with local rates up to roughly 11.2%, and a property tax system that runs well below the national average. Where you live, how your business is structured, and what kind of income you earn all move the real number more than any single headline rate does.

K&R's strategic tax advisory and preparation team helps Arizona business owners, real estate investors, and high earners figure out where these rates actually land for their specific situation, and what to do about it before the return is due. Contact us to talk through your numbers.

Frequently Asked Questions

What is Arizona's income tax rate? A flat 2.5% on all individual taxable income, effective since tax year 2023. Arizona's corporate income tax rate is 4.9%.

What is Arizona sales tax? Arizona's sales tax is technically called the Transaction Privilege Tax (TPT). The state rate is 5.6%, and combined with county and city rates, the average total is 8.52%, ranging up to roughly 11.2% depending on location.

Is Arizona a tax-friendly state? Generally yes. Arizona ranks 14th overall on the Tax Foundation's 2026 State Tax Competitiveness Index, driven by its low flat income tax, below-average property tax rate, and lack of an estate tax, though its combined sales tax rate runs above the national median.

Are medical expenses deductible in Arizona? Yes, and more favorably than federally. Arizona allows a deduction for the full amount of qualified medical expenses on the state return, without the 7.5%-of-AGI floor that limits the federal deduction.

What is the property tax rate in Arizona? The average effective rate is approximately 0.48%, ranking Arizona 46th among the states (meaning among the lowest). Actual rates vary by county, school district, and special taxing district.

Does Arizona tax Social Security or retirement income? Social Security benefits and military retirement pay are both fully exempt from Arizona income tax. Other retirement income, such as private pensions and 401(k) distributions, is generally taxable at the flat 2.5% rate.