State retirement tax · Arizona
Retirement tax rules for Arizona residents (2026 guide)
Arizona taxes retirement income at a flat 2.5%, one of the lowest rates of any state that has an income tax. Social Security and military retirement pay are exempt, government pensions get a small $2,500 break, and homeowners 65+ with modest incomes can freeze their home's taxable value.
By Mindaugas Laucius · Last reviewed October 21, 2026
Rate on retirement income
2.50%
Taxes Social Security?
No
Approx. tax on $90k retirement income
$1,500
Pension carve-outs
Yes
Quick figures: a single filer with $90,000 of income, $30,000 of it Social Security.
What's taxed and what isn't
Social Security is fully exempt, and since 2021 so is military retirement pay. Pensions from the state, Arizona cities and counties, and the federal government get a $2,500 subtraction per person; the rest is taxed. Private pensions, 401(k) and IRA withdrawals are taxed in full at the flat 2.5% rate.
Property taxes and the senior valuation freeze
Arizona limits growth in a home's limited property value — the value taxes are figured on — to 5% a year. Homeowners 65 and older whose average total income over the prior three years is under $47,712 (one owner) or $59,640 (two or more) can also apply for the Senior Valuation Protection Option, which freezes the limited value for three years and can be renewed.
Sales tax
Arizona's transaction privilege tax is 5.6% at the state level, with city and county rates on top, so combined rates commonly run around 8%–9%.
Worked examples
Private pension and IRA withdrawals
- $60,000 of private pension + IRA income; Social Security exempt.
- $60,000 × 2.5% = $1,500 before Arizona's standard deduction, which lowers it further.
At most about $1,500 a year in state tax.
A state retirement-system pension
- $40,000 pension − $2,500 government-pension subtraction = $37,500.
- $37,500 × 2.5% = $937.50 before deductions.
Under $940 a year.
A military retiree
- $45,000 of military retirement pay + $25,000 of Social Security.
Arizona tax on both: $0.
Recent and pending changes
- 2023: Arizona moved to a flat 2.5% income tax.
- 2021: military retirement pay became fully exempt.
Run your own numbers — pick Arizona in the calculator’s Taxes tab for a year-by-year estimate. Or compare all 50 states and DC.
Thinking about a move? The free state-to-state retirement tax comparison puts Arizona next to any other state on your own income.
Arizona questions
Is Arizona's $2,500 pension subtraction per person?
Yes. Each spouse with a qualifying government pension can subtract up to $2,500 of it.
How do I apply for the senior valuation freeze?
Through your county assessor. You'll need proof of age, residency and income for the prior three years, and you reapply every three years.
Does Arizona tax Roth conversions?
Yes — a conversion counts as taxable income at the 2.5% rate in the year you convert.