Arizona Taxes

Plan Ahead for Arizona Taxes

Arizona Taxes
Stephen Swintek / Getty Images

Are you considering a move to Arizona? If the answer is yes, you might want to do some research about Arizona taxes. My guess is that some Arizona taxes will be lower than wherever you are moving from, and some taxes will be higher. For instance, many people are unpleasantly surprised by the personal property tax levied against automobiles in Arizona. It is paid along with your vehicle registration. Others are very pleasantly surprised that property taxes might be lower in Arizona. It all depends on your personal situation.

Whether the level of taxation in Arizona is a factor in your move or not, it is best to be aware so there are no tax surprises later.

Arizona's Personal Income Tax

Residents and nonresidents that earn income in Arizona will pay state income tax. To compute your Arizona income tax, you will start with your federal adjusted gross income. Then you will be able to make certain additions and subtractions to arrive at Arizona taxable income. For instance, you will have an addition to income if you have interest income from non-Arizona municipal bonds. You will have a deduction from income for state tax purposes for social security benefits you receive, and a portion of your income from a U.S. Government and Arizona state or local pension.

Arizona taxpayers may take a standard deduction, or itemize. There is one personal exemption allowed per taxpayer, and some may be able to take additional exemptions if there are qualifying dependents. If you're receiving Social Security, you should know that Arizona is one of the states that doesn't tax those benefits. 

Arizona's Vehicle Tax

The fee to obtain a driver license is between $10 and $25. You can determine how much it will cost you at the Motor Vehicle Department website. The fee to register your vehicle is generally less than $15, but there is an additional vehicle license tax (VLT) assessed at the time of registration. This is the equivalent of the personal property tax charged by other states. The more valuable your vehicle, the higher the VLT will be. You can expect a newer model, high end vehicle to have an annual fee of several hundred dollars.

Each year that you own the vehicle, the value will decline, as will the amount of the vehicle license tax you will have to pay. If you want to try to calculate the amount of the registration fee of your vehicle, you can give it a try! Check the calculation here, under "VLT."

Arizona's Gas Tax

in addition to the tax imposed by the federal government, Arizona adds a tax on gasoline for most non-commercial, non-diesel vehicles.

Arizona's Estate Tax

Since 2005 Arizona has not imposed an estate tax or a gift tax. It has not been reinstated as of this date (2017).

Arizona's Property Tax

Arizona charges a property tax for owner-occupied residential real property. There are several classes of properties with varying assessment ratios. The assessment ratio for owner-occupied residential property is 10 percent of full cash (market) value. Tax jurisdictions set tax rates on the basis of the total assessed valuation within their boundaries and the amount of the levy to be raised. Phoenix is located in Maricopa County, and the Maricopa County Assessor is responsible for determining the assessed value of residential property here.

The tax rate applicable to each parcel of property is the sum of the state, county, municipal, school, and special district rates.

Arizona's Property Tax on Household Goods or Intangible Personal Property

Arizona does not have a property tax on household goods or intangible personal property.

Arizona's Sales Tax

The Arizona sales tax rate is 5.6%. Currently, all fifteen counties levy a tax in addition to the state tax. For Maricopa County, where Phoenix is located, that's 0.7%, making a sales tax of 6.3%. Incorporated municipalities also levy transaction privilege taxes which are generally in the range of 1.5% to 4% in Maricopa County. Hotel and taxi services have additional taxes charged.

The state of Arizona does not levy a state tax on drugs prescribed by a licensed physician or dentist. While the State of Arizona does not tax food for home consumption, many cities in Arizona do.

Disclaimer: All tax information here is subject to change without notice. For more information about Arizona taxes, visit the Arizona Department of Revenue website.