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

How Arizona taxes retirement income (statute-cited)

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

Is Arizona a good state to retire in for taxes?

Arizona vs. other relocation favorites

Comparison tables scroll horizontally on smaller screens.

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).

Federal civil service pensions in Arizona: does Arizona tax federal pensions.

State retirement-income forms, line by line: Arizona Form 140 line 29a.

Inherited an IRA? What the state’s own documents say about taxing those withdrawals: Arizona tax on inherited IRA withdrawals.

Hold a 403(b) or 457(b)? What the state’s own documents say about taxing those withdrawals: does Arizona tax 403(b) and 457(b) withdrawals.

Before the tax question, the corrections officer plan (CORP), with its refund and survivor rules from its own handbook: Arizona CORP retirement decisions.

Drawing a pension? Whether the state withholds tax from it, from its own documents: Arizona tax withholding on pension payments.

Selling your home? How the state taxes the profit, from its own tax documents: Does Arizona tax the profit from selling your home?.

The state’s income tax schedule: the Arizona 2026 tax brackets (pending).

Withdrawing from an IRA or 401(k)? Whether the state withholds tax from it, from its own documents: Arizona tax withholding on IRA and 401(k) withdrawals.

For a pension earned elsewhere or paid after you move: does Arizona tax out-of-state pensions.

Before the tax question, the Phoenix city pension options, refund and buyback rules from the COPERS guide: Phoenix COPERS retirement decisions.

For trust income specifically: does Arizona tax trust income.

Inheriting from, or planning for, someone in this state? Whether the state has an inheritance tax, from its own tax documents: Does Arizona have an inheritance tax?.

For dividends and interest specifically: does Arizona tax dividends and interest.

Making a gift or planning an estate? The state’s gift tax answer, from its own tax documents: Does Arizona have a gift tax?.

For annuity payments specifically: does Arizona tax annuity income.

Planning for what you leave behind? The state’s estate tax answer, from its own tax documents: Does Arizona have an estate tax?.

For military retired pay: does Arizona tax military retirement.

Saving for a child’s college? The state’s 529 break has its own page: Arizona 529 plan tax deduction.

For the sale of stocks, funds or real estate: does Arizona tax capital gains.

For 401(k) and IRA withdrawals specifically: does Arizona tax 401(k) and IRA withdrawals.

Before the tax question, the PSPRS DROP, survivor benefit and refund rules: PSPRS retirement decisions.

Before the tax question, the ASRS payment options and refund rules: ASRS retirement decisions.

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; A.R.S. §43-1022, paragraph 26)
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. For 2025, after the standard deduction, a single filer ($15,750) owes 2.5% of $44,250, or $1,106.25, and a married couple filing jointly ($31,500) owes 2.5% of $28,500, or $712.50, before any exemptions or credits. 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%, so a $60,000 withdrawal year costs a single filer $1,106.25 for 2025 after the $15,750 standard deduction, before any exemptions or credits. 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 is one of 43 jurisdictions that do not tax Social Security at any income level in 2026. The other 8 exempt benefits only up to an income or age limit. Full rules and statutes: the 51-state table.

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.

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.

Figures verified against A.R.S. §§43-1022, 14-3971 and 14-3719 on azleg.gov and the Arizona Department of Revenue military filing page, with the flat rate, estate-tax status and North Carolina rate cross-checked to the Tax Foundation 2026 state income tax and estate/inheritance tax tables (secondary), on September 30, 2026; the HB 2116 signing date, the Maricopa County filing fee, Georgia’s exclusion amounts, the SEC adviser statistics and the 51-state Social Security count were not re-checked.

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

What this state guide covers