Arizona Retirement Taxes (2026): 2.5% Flat Rate, Exemptions

2026 edition · statute-cited · part of Clear Money Guide’s 51-state retirement tax series. This guide covers state taxes on retirement income and estate transfers; property and sales taxes vary by county and are outside its scope.

Updated July 24, 2026. Quick answer: Arizona taxes retirement-account income at one of the lowest flat rates in the country — 2.5% — and exempts the big categories entirely: Social Security is not taxed (subtracted from Arizona gross income), military retirement pay is 100% exempt, and there is no estate or inheritance tax. The trade-off: private pensions, 401(k) and IRA withdrawals are taxable at that 2.5%, with only a $2,500 subtraction for government pensions (A.R.S. §43-1022).

How Arizona taxes retirement income (statute-cited)

Income tax rate	Flat 2.5%
Social Security	Not taxed (subtracted from Arizona gross income)
Private pension / 401(k) / IRA	Taxed at 2.5%
U.S. government & AZ state/local pensions	Subtraction up to $2,500 (A.R.S. §43-1022), then 2.5%
Military retirement	100% exempt (since TY2021); SB1749 (effective 2026) extends the exclusion to payments from all veterans’ pensions, not just disability pensions
Estate / inheritance tax	None

Worked example: a retiree with $60,000 of 401(k)/IRA withdrawals and $30,000 of Social Security pays Arizona tax on the $60,000 only: at 2.5%, $1,500. A military retiree with the same income pays $0.

New: Arizona’s small-estate limits more than doubled

HB 2116 (signed March 31, 2025) raised Arizona’s small-estate affidavit limits under A.R.S. §14-3971 from $75,000/$100,000 to $200,000 of personal property and $300,000 of real property (both net of liens), with 30-day and 6-month waits respectively — among the most generous in the country, and fully in effect in 2026. Many published guides still show the old limits. For estates above them, Arizona is a reasonable-fee probate state: no statutory percentage schedule for attorneys or personal representatives (A.R.S. §14-3719); initial filing runs about $306 in Maricopa County. Context: probate cost by state · small-estate limits by state · will vs. trust calculator.

Is Arizona a good state to retire in for taxes?

For most retirees, yes with one asterisk: everything Washington sends you (Social Security, military pay) escapes Arizona tax, and what your accounts send you is taxed at just 2.5% — a $60,000 withdrawal year costs $1,500. Zero-income-tax states beat that on paper, but the gap is small at typical retirement incomes, and Arizona’s no-death-tax, high-small-estate-limit combination keeps end-of-life costs low too. Government retirees should note the modest $2,500 pension subtraction — Arizona is friendlier to military and account-based retirees than to civil-service pensioners.

Arizona vs. other relocation favorites

State	Social Security	Pension / 401(k) / IRA	Estate tax	Inheritance tax
Arizona	Not taxed	Taxed at flat 2.5%; $2,500 gov-pension subtraction	None	None
Texas	Not taxed	Not taxed (no income tax)	None	None
Florida	Not taxed	Not taxed (no income tax)	None	None
Georgia	Not taxed	Excluded up to $65,000/person at 65+ ($35k at 62–64)	None	None
North Carolina	Not taxed	Taxed at flat 3.99% (2026)	None (repealed 2013)	None

Comparison rows summarize general rules; see our 51-state retirement tax table for statute-cited detail.

Considering a Roth conversion? The converted amount is taxed as ordinary income in the year you convert, and Arizona may treat it differently from the retirement income above — see how all 51 jurisdictions tax Roth conversions.

Finding a financial advisor in Arizona

Per the SEC’s July 2026 Investment Adviser roster, Arizona has 199 SEC-registered advisory firms (#20 nationally) managing $507.2 billion (#26 by AUM). Full breakdown: Arizona advisor statistics. A cross-state move is exactly when fee structures deserve a second look — see the fee-drag calculator.

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Thinking about moving?

Four taxes change when you move state in retirement, not one: income tax on withdrawals, state estate tax, state inheritance tax, and what probate costs your heirs. Corridor comparisons involving Arizona:

Moving to Arizona? See retiring to Arizona.

Compare any two states with the retirement tax comparison tool, or browse all corridors at the relocation hub.

What probate costs in Arizona

Arizona sets probate compensation by a “reasonable fee” standard with no percentage schedule, so anyone quoting a firm figure is estimating. Its small-estate route of $200,000 can reach real property under the statutory cap — unusual, and worth confirming against the property’s value. Full detail with the governing statute, the court filing fee and the threshold: Arizona probate cost. To price a specific estate, use the probate cost calculator.

Cite or share this guide

Suggested citation: Clear Money Guide, “Arizona Retirement Taxes (2026 edition),” statute-cited; clearmoneyguide.com/arizona-retirement-taxes/. Free to cite with attribution and a link. Data verified July 23–24, 2026 against state statutes, session laws, and revenue-department guidance.

Arizona Retirement Taxes (2026): The Flat 2.5% Rate, What’s Exempt, and What Probate Costs