Arizona residents pay an income tax when they file their taxes each year. The amount that they pay depends on their income. They also pay a state sales tax, and some municipalities have local sales taxes.
Some products — such as tobacco, fuel, and alcohol — cost more because Arizona charges additional fees for them. Property owners do have to pay a tax on their holdings, but property tax rates in the state are much lower than in other parts of the United States. Finally, Arizona no longer levies estate taxes.
Several factors determine the tax amount you have to pay in Arizona, including your location, income bracket, property holdings, and buying habits.
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Arizona Income Tax
Individuals and couples who make more than $15,000 per year in gross income or $5,500 in gross adjusted income need to file a tax return in Arizona. You calculate your income the same way you would for your federal tax returns, and you can exclude military pay and Social Security retirement benefits when filling in your state tax returns.
Though you can claim credits for taxes paid in another state, Arizona residents are liable for all income, even if earned outside of Arizona. The income figures on state tax returns should match those on the same year’s federal tax returns.
Residents file Form 140 for income taxes in Arizona. Several variations of this form exist, but the tax code requires that you submit a standard Form 140 if you earn more than $50,000 in gross income, if you itemize deductions, or if you are making income adjustments. You can opt to file an alternative form, Form 140A, if you make less than $50,000, if you do not perform income adjustments or itemize deductions, and if you meet additional requirements. Form 140EZ is for full-year Arizona residents who aren’t retired and also meet all the requirements for form 140A.
If you moved into or out of Arizona during the year, you should file Form 140PY to account for the income you earned while you lived in the state.
Current Arizona income tax rates range from 2.59% to 4.54% depending on the amount of income you earn.
Tax brackets can change from year to year. Currently, tax filers fit into the following brackets:
Single filers —
- $0 to $26,500: 2.59%.
- $26,01 to $53,000: 3.34%.
- $53,001 to $159,000: 4.17%.
- $159,000 and over: 4.5%.
Married filers —
- $0 to $53,000: 2.59%.
- $53,001 to $106,000: 3.34%.
- $106,001 to $318,000: 4.17%
- 318,001 and over: 4.5%.
Arizona Sales Tax
Arizona sales tax is officially the Arizona Transaction Privilege Tax (TPT). Technically, this tax is on vendors, rather than consumers. However, consumers could be liable if they use products on which the vendor did not collect the tax. As with other states, vendors usually pass on the tariff to consumers when they make a purchase.
Vendors pay for the privilege of doing business in the state. The state rate is 5.6% on certain tangible goods. A resident who uses or stores such property is technically responsible for sales tax if the seller did not collect the tax. Most stores add the tax when they sell items.
Online sellers from other states are liable for Arizona sales taxes if they sell and ship to Arizona residents. Arizona residents are responsible for taxes if they purchased something from an out-of-state vendor who did not pay sales tax.
Some Arizona municipalities charge additional sales taxes. These additional charges can bring the total sales tax in certain places up to as high as 11.2%.
Arizona Property Tax
Aside from centrally valued properties such as airports and railroads, property taxes get administered at the county level. The county assessor values property, and the owner pays taxes to the assessor’s office. The assessor uses assessed value, not market value, to determine the amount of property tax.
Property tax rates can vary significantly by county. School levies, municipal taxes, and other variables may affect your property taxes. You may also apply for exemptions and deductions. For instance, you can apply for a rebate if you use renewable energy.
Arizona Estate Tax
An estate tax is levied on a deceased person’s assets before their beneficiaries claim their inheritance. An estate tax is different than an inheritance tax, which comes after the assets get turned over to the beneficiaries.
The estate tax is sometimes known as a “death tax.” Arizona has not had an estate tax since 2005. As an Arizona resident, no matter how large your estate is, it will not be subject to state taxes when you pass away.
Other Taxes in Arizona
Arizona residents pay excise taxes (colloquially known as “sin taxes”) on certain items. The most common examples include:
- The gas tax in Arizona is $0.18 per gallon for auto fuel.
- For a regular pack of 20 cigarettes, you pay a tobacco tax of $2.00.
- Arizona also has various taxes on alcohol known as liquor “luxury taxes.” These are different depending on the type of alcoholic beverage that you purchase.
- $0.16 per gallon of beer;
- $0.84 per gallon of wine;
- $3.00 per gallon of hard liquor;
- The tax for a cell phone service plan is 11.96%.
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