Arizona has a flat state income tax rate of 2.5% on all taxable income. In 2023, Arizona transitioned to a flat tax system, giving it one of the lowest income tax rates in the nation.
Arizona Flat Tax Rate
| Taxable Income | Tax Rate |
|---|---|
| All income | 2.5% |
Arizona's 2.5% flat tax is one of the lowest state income tax rates in the country, based on Arizona Department of Revenue guidelines.
What You'll See on Your Paystub
An Arizona worker's paystub includes both federal income tax withholding and state deductions:
| Deduction | Rate | Notes |
|---|---|---|
| Federal Income Tax | Varies | Based on W-4 and income |
| Social Security | 6.2% | Up to $181,200 wage base |
| Medicare | 1.45% | No wage limit |
| Arizona State Income Tax | 2.5% | Flat rate on all taxable income |
Arizona Withholding Percentages
Arizona allows employees to choose their withholding percentage. You can elect to have withheld:
- 0.5% of gross taxable wages
- 1.0% of gross taxable wages
- 1.5% of gross taxable wages
- 2.0% of gross taxable wages
- 2.5% of gross taxable wages
- 3.0% of gross taxable wages
Since the tax rate is 2.5%, selecting 2.5% withholding should result in minimal refund or amount owed at tax time.
Arizona Standard Deduction
Arizona offers a standard deduction that reduces your taxable income:
| Filing Status | Standard Deduction (2026) |
|---|---|
| Single | $14,600 |
| Married Filing Jointly | $29,200 |
| Head of Household | $21,900 |
No Local Income Taxes
Arizona does not allow cities or counties to impose local income taxes. Your state withholding covers all Arizona income tax obligations.
Arizona Sales Tax
While Arizona has low income tax, be aware of transaction privilege tax (sales tax):
- State rate: 5.6%
- Local rates: Up to 5.6% additional
- Combined maximum: Up to 11.2% in some areas
Retirement Income
Arizona offers tax benefits for retirees:
- Social Security benefits are not taxed
- Up to $2,500 exclusion for government pensions
- Military retirement pay is tax-free
Arizona's low income tax rate combined with no tax on Social Security makes it popular with retirees.
Arizona vs. Neighboring States
| State | Tax Structure | Top Rate |
|---|---|---|
| Arizona | Flat | 2.5% |
| Nevada | None | 0% |
| California | Progressive | 13.3% |
| New Mexico | Progressive | 5.9% |
| Utah | Flat | 4.65% |
| Colorado | Flat | 4.4% |
Comparing Take-Home Pay
Here's how a $75,000 annual salary in Arizona compares to other states:
| State | Effective Rate | Annual State Tax |
|---|---|---|
| Arizona | ~2.0% | ~$1,500 |
| Nevada | 0% | $0 |
| California | ~6% | ~$3,200 |