Arizona Retirement
Arizona has become one of the nation's most popular retirement destinations because of its warm climate and low cost of living. Although costs are low there, Arizona residents still have to contend with taxes.
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Income Taxes in Arizona
Unlike its neighbor Nevada, Arizona has a state income tax. The state income tax rate in Arizona is still one of the lowest in the nation.
Persons who make less than $50,000 a year have a tax rate of 3% in Arizona. Those that earn between $50,000 and $150,000 a year pay a 4% Arizona income tax. Taxpayers that earn more than $150,000 a year pay a 5% income tax in Arizona.
All individuals that make at least $5,500 a year and married couples that make $15,000 a year in adjusted gross income have to file an Arizona income tax return. The amounts in the Arizona tax return are the same as those in the federal income tax return.
Arizona income taxes are based upon the amounts reported in your federal income tax return. This means that you will have to pay Arizona income tax on money earned in other states. This includes taxable retirement and investment income. Part time residents that file an Arizona income tax return will have to pay the same amount of taxes as full time residents.
Arizona does not provide exemptions for seniors but it does make a number of income tax credits available to residents. Arizona residents can get tax credits for the purchase of health insurance and water conservation systems. A state property tax credit is also available.
No Estate or Gift Taxes in Arizona
There are no estate or gift taxes in Arizona. The state abolished those levies in 2005. Another tax that Arizona lacks is a capital gains tax. Inheritances, investments, and gifts would be subject to the regular Arizona income tax.
Arizona Sales Tax
In a strict sense, Arizona does not have a sales tax - instead it has something called the Transaction Privilege Tax. The TPT enables the state, city, and county governments to add specific charges to certain kinds of business transactions in Arizona.
Most retail sales and many services including repair work are subject to the TPT. Utilities are among the services taxed in Arizona.
There is no uniform state sales tax rate in Arizona. The rate of the TPT varies widely because different levels of taxes are assessed on different goods and services. Different rates of TPT are collected in different cities and counties. Some cities also collect other sales taxes that are separate from the TPT. The best way to determine the rate of TPT is to consult the Rate Charts prepared by the Arizona Department of Revenue.
Arizona Property Taxes
Taxes on residential properties in Arizona are collected by the county assessor. As in most states, property taxes in Arizona can vary widely because different county, city, and local governments have different tax rates. To determine their property tax rate Arizona homeowners will have to contact their County Assessor's Office.
Arizona has a Seniors Valuation Protection Law on the books. This legislation restricts the amount of property tax that can be collected on a home to 1% of the property's cash value. To take advantage of this statute a person will have to own a home and be over 65 years of age. Individuals will have to apply to their county assessors' office before Sept. 1 in order to get valuation protection for the following year.
| Capital: | Phoenix |
| Cost of Living Rank: | #36 |
| Sales Tax: | Varies |
| Income Tax: | 4% - 5% |
| State Website: | http://www.az.gov |