Arizona state income tax
Arizona has a state income tax. It is flat, with a top marginal rate of 2.5%. Arizona moved to a flat individual income tax rate of 2.5% beginning tax year 2023 (accelerated from a planned phase-down once a revenue trigger was met). There are no graduated brackets or X&Y tax tables for tax year 2023 and after. A further cut to 2.42% (SB1318) was proposed for TY2026 but the bill died in the legislature, so 2.5% remains in effect for 2025 and 2026. Capital gains are taxed as ordinary income (no special lower rate).
Does Arizona have a state income tax?
Yes. Arizona taxes individual income on a flat schedule topping out at 2.5%. Arizona moved to a flat individual income tax rate of 2.5% beginning tax year 2023 (accelerated from a planned phase-down once a revenue trigger was met). There are no graduated brackets or X&Y tax tables for tax year 2023 and after. A further cut to 2.42% (SB1318) was proposed for TY2026 but the bill died in the legislature, so 2.5% remains in effect for 2025 and 2026.
| Item | Arizona |
|---|---|
| State income tax | Yes, flat |
| Top marginal rate | 2.5% |
| Capital gains | Taxed as ordinary income, up to 2.5% |
| State sales tax | 5.6% (plus local) |
| Avg. property tax rate | 0.52% of home value |
| Estate / inheritance tax | None |
How does Arizona tax capital gains?
Arizona has no separate, lower rate for capital gains. They are taxed as ordinary income at the same rates as your wages, up to 2.5%, on top of federal capital gains tax. See how capital gains tax works in 2026.
What about retirement income in Arizona?
Retirement income is taxed differently from wages in many states. For how Arizona treats Social Security, pensions, and 401(k)/IRA withdrawals, see Arizona retirement taxes.
Sources
- Arizona income tax rates and brackets: Arizona Department of Revenue / Taxation.
- Arizona capital gains treatment: Arizona tax authority.
- Arizona sales tax: Arizona Department of Revenue.