Arizona has a state income tax, and most working residents must file a return each year
Arizona charges state income tax on wages, self-employment income, interest, dividends, and other earnings. The tax rate varies based on your income level — Arizona uses a progressive tax system with brackets that change each year. If you work in Arizona or live there, you almost certainly owe state income tax unless your income falls below the filing threshold for your situation.
The state income tax is separate from federal income tax. You file both returns, and Arizona does not give you a credit for what you pay federally. The Arizona Department of Revenue handles state returns and audits.
Key Takeaways
- Arizona residents and anyone earning income in Arizona must file a state return if their income exceeds the annual filing threshold, which varies by age and filing status.
- Arizona tax brackets range from roughly 2.5% to 4.5% depending on your income level and filing status, and these rates change yearly.
- You file your Arizona return using Form 140 (or 140-PZ for part-year residents) and can file electronically through the Arizona Department of Revenue website or use tax software.
- If you work in Arizona but live in another state, you may owe Arizona tax on wages earned in the state, though you can claim a credit on your home state return to avoid double taxation.
Who must file an Arizona state return
You must file if you are an Arizona resident and your income exceeds the filing threshold. The threshold depends on your age and filing status. For example, a single person under 65 typically must file if their income is above a certain amount that changes annually — check the Arizona Department of Revenue website for the current year's threshold. If you are 65 or older, the threshold is higher. Married couples filing jointly have a different threshold than single filers.
Non-residents who earned income in Arizona must also file, even if they do not live there. This includes people who worked in Arizona for part of the year or received income from Arizona sources like rental property or business activity. If you moved to or from Arizona during the year, you file as a part-year resident using Form 140-PZ.
Some people below the threshold still benefit from filing — for instance, if taxes were withheld from your paycheck, you may get a refund by filing. Self-employed people should file even if income is low, because they may owe self-employment tax.
Arizona tax rates and brackets for 2024
Arizona uses a progressive tax system, meaning your tax rate increases as your income increases. You do not pay one flat rate on all your income; instead, different portions of your income are taxed at different rates. The brackets change each year to account for inflation.
For 2024, Arizona has five tax brackets. The lowest rate is approximately 2.5% on the first portion of taxable income, and the highest is approximately 4.5% on income above a certain threshold. The exact dollar amounts where each bracket begins depend on your filing status — single, married filing jointly, married filing separately, or head of household. Because these brackets adjust annually, you should check the Arizona Department of Revenue website or your tax software for the current year's exact numbers before you file.
Arizona also allows certain deductions and credits that can lower your taxable income. For example, you can deduct federal income tax paid, mortgage interest, charitable contributions, and other items. Credits like the Earned Income Tax Credit (EITC) reduce your tax dollar-for-dollar.
How to file your Arizona state return
You file using Form 140 (or Form 140-PZ if you are a part-year resident). You can file electronically through the Arizona Department of Revenue website, use tax software that supports Arizona returns, or file by mail. Electronic filing is faster and reduces errors — the state processes e-filed returns more quickly than paper returns.
You will need your Social Security number, W-2 forms from employers, 1099 forms for other income, records of deductions you are claiming, and documentation of any credits you are taking. If you are self-employed, you will also need records of business income and expenses to calculate your net profit.
The filing deadline is typically April 15, the same as the federal deadline. If you file late, you may owe penalties and interest. You can request an extension, which gives you until October 15 to file, but an extension does not extend the time to pay taxes owed — you still owe payment by April 15 to avoid penalties.
Arizona tax on out-of-state residents who work in Arizona
If you live in another state but work in Arizona, you owe Arizona income tax on the wages you earned in the state. You file an Arizona return reporting only the income earned in Arizona. You also file a return in your home state, which typically taxes all your income regardless of where you earned it.
To avoid paying tax twice on the same income, most states offer a credit for taxes paid to other states. Your home state return will have a line for this credit. You claim the Arizona tax you paid, and it reduces what you owe your home state. The credit is usually limited to the lesser of what you paid Arizona or what your home state would have charged on that income.
Some states have reciprocal agreements with Arizona, meaning residents of those states do not owe Arizona tax on wages earned there. Check with your home state's tax authority to see if such an agreement exists.
Deductions and credits available in Arizona
Arizona allows you to deduct federal income tax paid during the year, which is one of the largest deductions available. You can also deduct state and local taxes (up to a limit), mortgage interest, charitable contributions, medical expenses above a certain threshold, and business expenses if you are self-employed.
Arizona offers several credits that reduce your tax directly. The Earned Income Tax Credit mirrors the federal credit and helps low- to moderate-income workers. There are also credits for dependent care expenses, education expenses, and property tax paid. Some credits are refundable, meaning if the credit exceeds your tax, you receive the difference as a refund. Others are non-refundable and can only reduce your tax to zero.
Arizona also allows a deduction for contributions to certain retirement accounts, such as traditional IRAs. If you are over 65, you may be able to deduct a portion of your income. Check the Arizona Department of Revenue website or your tax software to see which deductions and credits apply to your situation.
What happens if you do not file or pay on time
If you owe Arizona tax and do not file or pay by the deadline, the state charges penalties and interest. The failure-to-file penalty is typically 5% of the unpaid tax per month, up to a maximum. The failure-to-pay penalty is usually 0.5% per month. Interest accrues daily on unpaid tax and is compounded monthly.
If you cannot pay by April 15, you can request a payment plan from the Arizona Department of Revenue. The state may allow you to pay in installments, though interest and penalties continue to accrue. Filing an extension request by April 15 gives you until October 15 to file, but does not stop penalties and interest from running if you owe tax.
If you do not file for several years, the state may file a return on your behalf based on information it has, or it may assess tax without filing a return at all. The longer you wait, the larger the penalties and interest become. If you owe back taxes, contact the Arizona Department of Revenue to discuss payment options.
Frequently Asked Questions
Do I have to pay Arizona income tax if I just moved there?
If you moved to Arizona partway through the year, you file as a part-year resident on Form 140-PZ. You owe Arizona tax only on income earned after you became a resident. You report income earned before the move on your previous state's return. The threshold for filing as a part-year resident is lower than for full-year residents, so you may have to file even if your total income for the year is modest.
What if I work in Arizona but my employer is out of state?
You owe Arizona tax on wages earned for work performed in Arizona, regardless of where your employer is located. Your employer may not withhold Arizona tax if they are based elsewhere, so you may owe when you file. Check your pay stub to see if Arizona tax is being withheld; if not, you may want to adjust your withholding or set aside money to cover the tax you will owe.
Can I deduct federal income tax on my Arizona return?
Yes. Arizona allows you to deduct federal income tax paid during the year. This is one of the largest deductions available and can significantly lower your Arizona taxable income. You report the federal tax you paid on your Arizona return, and it reduces the amount of Arizona tax you owe.
Is there a penalty for filing late if I get a refund?
No. If you are owed a refund, there is no penalty for filing late. However, you must file within a certain time frame (usually three years) to claim the refund. After that, the state keeps the money. Filing early ensures you receive your refund faster.
Do I need to file if I had taxes withheld but earned below the threshold?
You are not required to file, but you should consider it. If your employer withheld Arizona tax from your paycheck and your income is below the filing threshold, you likely overpaid and are owed a refund. Filing allows you to recover that money. You have three years from the original due date to file and claim the refund.