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State Tax System

Deductions and Exemptions
Arizona Taxpayers may take a standard deduction or itemize their deductions. The standard deduction and personal exemptions for a single person or a married person who files a separate return is $4,373. The deduction and personal exemption for head of household or a married couple who file a joint return is $8,745. Taxpayers may itemize deductions on their Arizona state return even if they filed a standard deduction on the federal tax return. State income tax is calculated on a variable scale based on income level, with the lowest rate being 2.87 percent of taxable income and a maximum of 5.04 percent minus $2,276 for the excess over $300,000 for joint filers. For information on income tax or answers to your questions, contact:

Arizona State Tax Information
1600 West Monroe, Phoenix
800.352.4090
www.azdor.gov

Property Tax
The assessment ratio for owner-occupied residential property is 10 percent of full cash (market) value. Tax jurisdictions set tax rates on the basis of the total assessed valuation within their boundaries and the amount of the required levy. This combined rate is the sum of state, county, municipal, school, and special district rates. For more information, contact the county assessor or visit one of the branch locations:

State Income Tax
Arizona imposes a personal income tax that uses the federal adjusted gross income as the starting point for tax computation. Since Arizona uses the federal adjusted gross income, any income that is taxable for federal purposes will also be subject to Arizona tax unless specifically excluded. Additions include interest income from non-Arizona municipal bonds. Subtractions include interest from federal government obligations, social security benefits, and those benefits that were received under the Railroad Retirement Act.

School Tax Credit
Arizona offers a way to support your local schools and receive a tax credit at the same time. Although this credit applies to fees or cash contributions paid to a public school for the support of extracurricular activities, you do not have to be a parent or have children in school to benefit. The credit is equal to the amount contributed with a limit of $200 for single taxpayers and $300 for taxpayers who are filing jointly (from 2006 forward, the credit for joint filers will be $400).

Maricopa County Assessor
301 West Jefferson Street, Phoenix
602.506.3406
www.mcassessor.maricopa.gov

Estate, Inheritance & Gift Taxes
Effective January 1, 2005, federal law eliminated the state death tax credit; therefore, Arizona no longer imposes an estate tax. Residents pay no gift, inheritance, poll, or intangible personal property tax.

General Sales/Use Tax
Retail sales tax in Arizona is 5.6 percent. Counties and municipalities add to this base state sales tax rate. Arizona does not levy a state tax on food for consumption at home or on drugs prescribed by a licensed physician or dentist, but some cities do levy a tax on food for home consumption. Use taxes of 5.6 percent apply to merchandise purchased outside of Arizona such as catalog or Internet orders where no tax was paid but the goods are “used” in Arizona. For more information, contact:

Arizona State Tax Information
1600 West Monroe, Phoenix
800.352.4090
www.azdor.gov

Source: FirstAmericanTitleCompany