Updated October 7, 2026. Quick answer: Only if you live there. Arizona taxes a nonresident only on Arizona sourced income, as the statute says: “income from sources within this state”. A resident is taxed on federal adjusted gross income less listed subtractions.
How Arizona treats a pension earned elsewhere
| Item | What the state documents say |
|---|---|
| Nonresidents | Arizona gross income for a nonresident includes only the part of federal adjusted gross income that comes from sources within Arizona. The Form 140NR booklet lists wages, rental income, business income, Arizona real estate sales and certain interest and dividends as Arizona source income. This row rests on Arizona Revised Statutes 43-1091 and the 2025 Form 140NR booklet. |
| Residents with a pension earned elsewhere | For a full year resident, Arizona gross income is federal adjusted gross income. The Form 140 booklet allows a subtraction of up to $2,500 per taxpayer for pensions from the federal government or Arizona state and local plans, and says public retirement pensions from other states do not qualify. Social security and railroad retirement benefits are not taxed. The booklet adds that these other-state plans do not qualify for the subtraction. |
| Part-year residents (year of a move) | A part-year resident is taxed on all income earned while an Arizona resident, including interest and dividends from outside Arizona, and on Arizona source income earned before moving in or after leaving. The subtractions are limited to those from all sources during residency and Arizona sources during nonresidency. The source says: “Any income you earned in 2025 while an Arizona resident.” This row rests on the 2025 Form 140PY booklet. |
| Rate | Arizona prints a single rate of 2.5% for all income levels and filing statuses for 2025. The same rate applies on Forms 140, 140PY and 140NR. |
| Return to file | Residents use Arizona Form 140, part-year residents use Form 140PY and nonresidents use Form 140NR. Each form is filed with its own 2025 booklet. |
A $40,000 move-year example
A retiree receives $40,000 of pension in the year of a move: $20,000 before the move date, as an Arizona resident, and $20,000 after leaving.
The first $20,000 can be taxed by Arizona; the rest is outside its reach under the federal rule below. At the 2.5% rate printed for 2025, the tax on it is computed as $20,000 x 0.025 = $500, before any exclusion or credit. Federal tax still applies.
The federal rule that protects a nonresident
4 U.S.C. 114(a) bars a state income tax on retirement income of an individual “who is not a resident or domiciliary of such State”. Retirement income means certain plan payments made as a “series of substantially equal periodic payments”, so not every payment is covered.
Related: how Arizona taxes retirement income, whether Arizona taxes pensions, California to Arizona retirement taxes, Colorado to Arizona retirement taxes, out-of-state pension tax by state, and deferred compensation lump sums after a move.
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Answer againSources
- 2025 Arizona Form 140 resident booklet (Department of Revenue): https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2025_140Booklet.pdf
- 2025 Arizona Form 140PY part-year booklet (Department of Revenue): https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2025_140PYBooklet.pdf
- 2025 Arizona Form 140NR nonresident booklet (Department of Revenue): https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2025_140NRBooklet.pdf
- Arizona Revised Statutes 43-1091 gross income of a nonresident (Legislature): https://www.azleg.gov/ars/43/01091.htm
- Arizona Revised Statutes 43-1022 subtractions (Legislature): https://www.azleg.gov/ars/43/01022.htm
- 4 U.S.C. 114, Limitation on State income taxation of certain pension income (U.S. Government Publishing Office, 2023 edition): https://www.govinfo.gov/content/pkg/USCODE-2023-title4/html/USCODE-2023-title4-chap4-sec114.htm
Sources: the primary documents linked above, read on October 7, 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.