Arizona does not tax Social Security benefits

Arizona exempts all Social Security income from state income tax. If you receive Social Security retirement, survivor, or disability benefits, you will not owe Arizona state tax on that money, regardless of how much you receive or what other income you have.

This exemption applies whether you file as a single filer or jointly. It also applies if you live in Arizona for part of the year or the full year. The exemption is automatic — you do not need to claim it separately or file a special form to get it.

Federal tax is a different matter. The federal government may tax part of your Social Security benefits depending on your total income, but that is separate from Arizona state tax and follows federal rules, not Arizona rules.

Key Takeaways

  • Arizona does not tax Social Security retirement, survivor, or disability benefits under state law.
  • The exemption is automatic and applies to all residents who receive Social Security, regardless of income level.
  • Federal tax on Social Security is determined by federal rules and income thresholds, not by Arizona state tax law.
  • If you file an Arizona state tax return for other income, you do not report Social Security benefits on it.
  • Other states have different rules, so if you moved to Arizona from another state or plan to move, check that state's rules separately.

How the Arizona exemption works on your tax return

When you file your Arizona state income tax return, Social Security benefits do not appear as taxable income. If you use tax software or work with a tax preparer, they will not include your Social Security amount in the Arizona taxable income calculation.

You may still receive a Social Security Benefit Statement (Form SSA-1099) from the Social Security Administration each January. This form shows how much you received in the prior year. You do not need to attach this to your Arizona return, but keep it for your records in case Arizona ever requests proof of your income.

If you have other income — such as wages, pensions, interest, or rental income — you will still report that on your Arizona return and pay tax on it. The Social Security exemption applies only to the Social Security portion of your income.

Federal taxation of Social Security is separate

The federal government has its own rules about whether to tax Social Security benefits. These rules are based on your "combined income," which includes half of your Social Security benefits plus all other income (wages, pensions, interest, dividends, and certain other sources).

If your combined income exceeds certain thresholds, the federal government taxes up to 50 percent or 85 percent of your benefits. The thresholds are $25,000 for single filers and $32,000 for married couples filing jointly. These thresholds have not changed since 1984 and do not adjust for inflation.

You determine federal tax liability on your Social Security benefits using IRS Form 1040 and worksheets in the IRS instructions. This is separate from your Arizona state return. Many people owe no federal tax on Social Security; others owe some. It depends entirely on your total income, not on where you live.

What counts as income for the federal threshold

The federal combined income calculation includes:

  • Wages and self-employment income
  • Taxable interest and dividends
  • Capital gains
  • Rental income and royalties
  • Pension and annuity income
  • IRA and 401(k) withdrawals
  • Half of your Social Security benefits

It does not include certain items, such as municipal bond interest or Roth IRA withdrawals (though Roth conversions do count). If you are unsure whether a specific income source counts, the IRS Publication 915 (Social Security and Equivalent Railroad Retirement Benefits) contains the full rules and worksheets.

Because the threshold is relatively low and has not changed in decades, many retirees with modest pensions or part-time work end up owing federal tax on part of their benefits even though they do not owe Arizona tax.

If you moved to Arizona from another state

Some states tax Social Security benefits, and others do not. If you moved to Arizona from a state that taxes Social Security, you may have owed tax in that state in prior years. Moving to Arizona does not change your tax liability for years you lived elsewhere — you still file returns for those states if required.

Starting with the tax year you move to Arizona, you will no longer owe Arizona state tax on Social Security. However, if you receive income from a pension or retirement account from your former state, check whether that state taxes those benefits. Some states tax pensions but not Social Security, or vice versa.

If you split a year between two states, you may need to file part-year returns in both. The state where you lived on December 31 is typically where you file for the full year, but rules vary. A tax preparer familiar with your situation can advise on your specific filing requirement.

Other Arizona tax considerations for retirees

Arizona does not have a general tax on retirement income, but it does tax certain types of retirement withdrawals. Distributions from traditional IRAs, 401(k)s, and similar plans are taxable income in Arizona (and federally). Distributions from Roth IRAs are not taxable in Arizona or federally.

Arizona also does not tax military retirement pay, federal employee retirement pay, or railroad retirement benefits. These are exempt from Arizona income tax, similar to Social Security.

If you receive a pension from your former employer, Arizona taxes that income. There is no blanket exemption for pensions, though some states offer pension exemptions for certain ages or income levels. Arizona does not.

Frequently Asked Questions

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

No. If Social Security is your only income, you have no Arizona tax filing requirement. You only file if you have other taxable income (wages, pensions, interest, capital gains, or self-employment income). Even then, you must meet the income threshold for your filing status.

Will Arizona ever tax Social Security in the future?

Arizona's current law exempts Social Security from state tax. Laws can change, but there is no current proposal to tax Social Security in Arizona. If you want to monitor this, you can check the Arizona Department of Revenue website or contact your state representative.

If I owe federal tax on Social Security, do I also owe Arizona tax?

No. Federal and state tax are separate. You can owe federal tax on Social Security and owe zero Arizona tax. The two systems use different rules and thresholds. Your federal return and Arizona return are filed separately.

What if I worked part-time while receiving Social Security?

Your wages are taxable in Arizona and federally, regardless of Social Security. The Social Security exemption applies only to your Social Security benefits. Report your wages on your Arizona return as you normally would. Your wages may also affect whether you owe federal tax on your benefits.

Do I need to report my Social Security income on my Arizona return?

No. You do not list Social Security on your Arizona state return. If you use tax software, it will skip this line for Arizona filers. Keep your Social Security Benefit Statement for your records, but do not attach it to your state return.