Updated October 4, 2026. Quick answer: Yes, with a break. Arizona taxes gains at its flat rate, “2025 New Tax Rate of 2.5% for All Income” levels, and lets you subtract “twenty-five percent of the net long-term capital gain” from assets acquired after December 31, 2011.
Selling your home? How the state taxes the profit, from its own tax documents: Does Arizona tax the profit from selling your home?.
The same question for dividends and interest: does Arizona tax dividends and interest.
How Arizona treats capital gains
| Item | What the documents say |
|---|---|
| Treatment | Taxed as income at the flat rate, with a 25% subtraction for qualifying long-term gains |
| 2025 rate | 2.5% |
| Subtraction | 25% of net long-term capital gain from an asset acquired after December 31, 2011 (A.R.S. 43-1022; Form 140, line 24) |
| Short-term gains | No subtraction |
A $50,000 long-term gain
A $50,000 long-term gain on an asset acquired after December 31, 2011 leaves three quarters of it taxable, computed as $50,000 less the 25% subtraction, which is $37,500, and $37,500 x 2.5% = $937.50.
A short-term gain, or one on an older asset, has no subtraction: $50,000 x 2.5% = $1,250.
What changes in 2026
The 2025 booklet is the latest Arizona document read, and it prints no 2026 rate.
Federal rules
The state’s treatment sits on top of the federal one. The IRS explains the federal tax on gains in Topic no. 409, Capital Gains and Losses and Publication 550, Investment Income and Expenses.
Related: whether Arizona taxes pensions, how Arizona taxes retirement income, the capital gains tax by state table, and the federal capital gains tax calculator.
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Answer againSources
- 2025 Arizona Form 140 Resident Personal Income Tax Booklet: https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2025_140Booklet.pdf
- A.R.S. 43-1022 Subtractions from Arizona gross income: https://www.azleg.gov/ars/43/01022.htm
Sources: the primary documents linked above, read on October 4, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the plan administrator or the agency itself is the right place to confirm anything consequential.