Arizona state income tax is levied on individuals who earn income in the state. This includes wages, salaries, bonuses, and other compensation paid to employees working in the state, as well as capital gains on the sale of assets. Social Security benefits are also taxable in Arizona, as is interest on U.S. government bonds. Other forms of taxable income include dividends, business interests and rental property.
The state’s top individual income tax rate is 2.5 percent. It applies to taxable income above $13,850 for single taxpayers, or $27,700 for married couples filing jointly. Arizona does not have personal exemptions, but there are several tax credits available to offset the state’s income tax.
Arizona State Income Tax 2023 Tax Year Update
New for the 2023 filing season, Arizona adopted a flat income tax rate of 2.5 percent, eliminating its previous progressive rate structure. It remains one of the lowest rates in the country. It’s also possible to save on taxes by making pre-tax deductions like those found in 401(k) plans, health savings accounts, and flexible spending accounts.
Every year, qualifying citizens must file federal and Arizona state taxes. Most grumble when their employers withhold money from their paychecks to pay these taxes. But if those taxpayers don’t itemize deductions on their tax returns, they may be missing out on an important tax credit.
A state tax refund is typically processed within 30 days of filing a return. The deadline for filing a state tax return in Arizona is April 15 (or Oct. 15 with an extension). This year, Arizona will be using a flat income tax rate of 2.5 percent instead of its previous graduated rates.