Menu burger Close thin Facebook Twitter Google plus Linked in Reddit Email arrow-right-sm arrow-right
Loading
Tap on the profile icon to edit
your financial details.

Arizona Retirement Tax Friendliness

Your Details Done

Overview of Arizona Retirement Tax Friendliness

Arizona does not tax Social Security retirement benefits. The state does, however, tax other types of retirement income, like distributions from an IRA or a 401(k). Arizona’s property taxes are relatively low, but sales taxes are fairly high.

If you want to optimize your retirement plan, SmartAsset's free online matching tool can help you connect with a financial advisor who serves your area.

Enter your financial details to calculate your taxes
Annual Social Security Income
Dismiss
Annual Retirement Account Income
Dismiss
Annual Wages
Dismiss
Location
Dismiss
Year of Birth
Dismiss
Filing Status
Annual Income from Private Pension
Dismiss
Annual Income from Public Pension
Dismiss
You will pay of Arizona state taxes on your pre-tax income of
Your Tax Breakdown
Federal
State
Local
Total Taxes
Quick Guide to Retirement Income Taxes
is toward retirees.
Social Security income is taxed.
Withdrawals from retirement accounts are taxed.
Wages are taxed at normal rates, and your marginal state tax rate is %.
Save more with these rates that beat the National Average
Unfortunately, we are currently unable to find savings account that fit your criteria. Please change your search criteria and try again.
Searching for accounts...
As of
Marketing Disclosure
Unfortunately, we are currently unable to find savings account that fit your criteria. Please change your search criteria and try again.
Searching for accounts...
As of
Marketing Disclosure
Share Your Feedback
How would you rate your experience using this SmartAsset tool?
What is the most important reason for that score? (optional)
Please limit your response to 150 characters or less.
Thank you for your answer! Your feedback is very important to us.

Arizona Retirement Taxes

Photo credit: ©iStock.com/omersukrugoksu

Arizona is a popular destination for seniors who want to relocate upon retirement. It has as much sunshine as any state in the U.S. and many of the amenities and attractions that appeal to seniors. When it comes to taxes, it turns out the Grand Canyon state is a good but not great choice for retirees.

Social Security is not taxed at the state level in Arizona. But, other forms of retirement income, including distributions from retirement savings accounts, are. Property taxes in Arizona won't break the bank, but sales taxes can hit a bit harder.

A financial advisor can help you plan for retirement and other financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

Is Arizona tax-friendly for retirees?

Arizona is moderately tax-friendly for retirees. Like most U.S. states, it does not tax Social Security retirement benefits. However, other types of retirement income are taxed, either partially or fully. Distributions from retirement savings accounts like a 401(k) or IRA are taxed as regular income, while income from a pension is eligible for a deduction.

Arizona’s state sales tax is 5.6%, while local rates can range up to 7.83%. The average effective property tax rate is 0.62%.

Is Social Security taxable in Arizona?

The state of Arizona does not tax Social Security retirement benefits. You may incur taxes at the federal level, however.

Are other forms of retirement income taxable in Arizona?

Income from retirement savings accounts like a 403(b) or a 401(k) is taxed as regular income by the state of Arizona. It should be combined with income from other sources like wages or salaries as part of your total income. Arizona has a flat income tax rate of 2.5% for all tax filers.

Income from pensions is also taxed as regular income. U.S. government civil service pension income and Arizona state or local pension income are all eligible for a deduction of $2,500 annually. Private pensions and pensions from states other than Arizona cannot receive this deduction. And, those who get retirement or retainer pay from the U.S. armed forces could deduct up to $3,500.

How high are property taxes in Arizona?

Arizona’s property taxes are relatively low. Homeowners face a median annual property tax bill of $1,648. That’s about $1,200 less than the national median and is one reason why housing costs in Arizona are below average.

What is the Arizona property valuation freeze?

The property valuation freeze is a form of property tax relief available to homeowners in Arizona with total income below a certain level. It freezes a home’s value for property tax purposes, which in turn limits any potential increases in annual property taxes.

For individual owners, the income level is $45,264 for 2023. For properties owned by two or more persons, the 2023 income level is $56,580. To be eligible, the property must be the owners' primary residence and they must have lived there at least two years.

Additionally, eligible seniors could defer payment of their property taxes on their principal residence entirely. To be eligible for deferment, they must comply with specific requirements, including an assessed property value maximum and a household income limit.

How high are sales taxes in Arizona?

Photo credit: ©iStock.com/ImagineGolf

The state sales tax rate is 5.6%, which is fairly normal. However, local sales tax can range up to 7.83%.

Food is a major expense for seniors, but Arizona doesn't tax the sale of groceries. Likewise, prescription drug sales are exempt from sales taxes in the state.

What other Arizona taxes should I be concerned about?

The Arizona state government does not impose an estate tax or inheritance tax, so retirees who wish to pass some of their property or wealth to loved ones do not need to worry.