Arizona has a progressive income tax system with rates that increase as your income rises

Arizona taxes your income at rates between 2.55% and 4.5%, depending on how much you earn. The state uses a progressive tax bracket system, meaning you pay different rates on different portions of your income — not one flat rate on everything you make. A single person earning $30,000 pays a lower rate on the first $15,000 than on the remaining $15,000.

The tax brackets change each year because Arizona adjusts them for inflation. For 2024, a single filer pays 2.55% on income up to roughly $16,000, then 3.34% on the next portion, and so on, reaching 4.5% on income above roughly $163,000. Married couples filing jointly have higher bracket thresholds, so the same income is taxed at a lower rate.

Arizona does not tax Social Security benefits, military pensions, or certain retirement income, which can significantly reduce what you owe. The state also allows you to deduct the federal income tax you paid, which lowers your Arizona taxable income.

Key Takeaways

  • Arizona's income tax rates range from 2.55% to 4.5% and depend on your filing status and total income for the year.
  • Tax brackets shift upward each year for inflation, so the exact dollar amounts where rates change differ between 2024 and 2025.
  • Social Security, military pensions, and some retirement income are not taxed by Arizona, even though they count as income federally.
  • You can deduct the federal income tax you paid from your Arizona taxable income, which reduces the amount Arizona taxes.
  • If you work in Arizona but live in another state, or vice versa, you may owe tax to both states and will need to file a nonresident return.

The five tax brackets and how they work

Arizona's five brackets mean your income is taxed in layers. The lowest bracket (2.55%) applies to your first dollars of income. Once you cross that threshold, the next portion of your income moves into the second bracket (3.34%), and so on. You never pay the highest rate on your entire income — only on the portion that falls into that bracket.

For 2024, the brackets for single filers are roughly: 2.55% up to $16,000; 3.34% from $16,000 to $32,000; 4.17% from $32,000 to $81,000; 4.35% from $81,000 to $163,000; and 4.5% on anything above $163,000. Married couples filing jointly have thresholds that are roughly double, and head-of-household filers fall in between. These numbers shift each year, so check the Arizona Department of Revenue website for the current year's exact brackets before you file.

The state also taxes capital gains (profit from selling stocks or property) and interest income at the same rates as wages. Dividends are taxed as ordinary income unless they may have access to for a special rate under federal law.

What income Arizona does and does not tax

Arizona taxes wages, self-employment income, interest, dividends, and rental income. It also taxes income from gambling, prizes, and most other sources. However, the state explicitly excludes Social Security benefits, military pensions, and certain retirement income from taxation.

If you receive a pension from the military, you do not owe Arizona tax on that income, even if you live in the state. Distributions from a traditional or Roth IRA are taxed as ordinary income, but withdrawals after age 59½ from a Roth IRA are not taxed if the account has been open for at least five years. Withdrawals from a 401(k) or similar employer plan are taxed as ordinary income.

Interest from U.S. Treasury bonds and certain municipal bonds is exempt from Arizona tax. However, interest from Arizona municipal bonds is also exempt, while interest from out-of-state municipal bonds may be taxable depending on the issuer.

How to file and when payments are due

Arizona income tax returns are due on the same date as federal returns — typically April 15 of the following year. You file Form 140 (for residents) or Form 140-NR (for nonresidents) with the Arizona Department of Revenue. If you file your federal return electronically, you can e-file your Arizona return at the same time through most tax software or a tax preparer.

If you owe tax, you can pay online through the Department of Revenue website, by mail, or through an authorized payment processor. If you expect to owe more than $400 for the year, Arizona requires you to make quarterly estimated tax payments if you are self-employed or have income that is not subject to withholding. Quarterly payments are due on April 15, June 15, September 15, and January 15 of the following year.

If your employer withholds too much tax from your paychecks, you will receive a refund when you file. Arizona processes refunds within 30 to 60 days if you e-file and choose direct deposit. Paper returns take longer.

Deductions and credits that reduce what you owe

Arizona allows you to deduct the federal income tax you paid during the year, which is one of the largest deductions available. You can also claim the standard deduction (a flat amount based on your filing status) or itemize deductions if they exceed the standard amount. For 2024, the standard deduction for a single filer is roughly $14,600, and for married filing jointly it is roughly $29,200.

The state offers several tax credits that directly reduce the tax you owe. The Arizona Earned Income Tax Credit mirrors the federal credit and provides money back to low-income workers. The dependent care credit, education credits, and property tax credit are also available depending on your situation. Credits are more valuable than deductions because they reduce your tax dollar-for-dollar, whereas deductions only reduce the income that is taxed.

If you are over 65 or blind, Arizona allows an additional standard deduction. If you pay property tax or rent, you may be able to claim the property tax credit, which can return several hundred dollars depending on your income and property tax paid.

Nonresident and part-year resident rules

If you worked in Arizona but lived in another state during 2024, you file Form 140-NR and pay tax only on the income you earned in Arizona. Your employer should have withheld Arizona tax from your paychecks if you worked here. If you moved to Arizona partway through the year, you file as a part-year resident and report only the income earned before you moved to the state.

If you lived in Arizona but worked in another state, you may owe tax to both states. Arizona taxes residents on all income, regardless of where it was earned. However, most states offer a credit for taxes paid to other states, so you do not pay tax twice on the same income. You will need to file a return in both states and claim a credit on your Arizona return for taxes paid to the other state.

Military members stationed in Arizona are generally not considered Arizona residents for tax purposes, even if they live here. If you are active duty military, you may be able to claim your home state as your residence for tax purposes.

Frequently Asked Questions

Do I have to file an Arizona return if I only lived there part of the year?

Yes, if you earned income while living in Arizona, you file as a part-year resident and report only the income earned during the months you lived in the state. You will need to provide the date you moved in or out. If you did not earn any income while in Arizona, you may not need to file.

What happens if I do not pay my Arizona income tax on time?

Arizona charges interest on unpaid tax at a rate set quarterly (currently around 8% annually) plus a failure-to-pay penalty of 0.5% per month, up to 25% total. If you cannot pay by April 15, you can request a payment plan or extension from the Department of Revenue. Filing an extension gives you until October 15 to file, but does not extend the time to pay — interest and penalties still apply to any unpaid balance.

Can I claim a dependent who lives outside Arizona?

Yes, you can claim any dependent who meets the federal requirements, regardless of where they live. Arizona follows federal dependent rules, so if you can claim them on your federal return, you can claim them on your Arizona return as well.

Is there a state Earned Income Tax Credit in Arizona?

Yes, Arizona has its own Earned Income Tax Credit that works similarly to the federal credit. The state credit is a percentage of the federal credit and is available to workers with low to moderate income. You claim it on your Arizona return using the same income and dependent information as your federal return.