Retirement Taxes in Arizona (2026)
Arizona taxes income at an effective 2.50%, exempts Social Security entirely, and exempts the first $2,500 of pension income. On our standard retiree profile it ranks 7 of 50 for total state tax burden at $7,617 a year, with property tax at an effective 0.47% and combined sales tax at 8.52%.
Tax is one part of the picture. See the full free report on your move → or look up a county →
Arizona at a glance
State income tax
2.50%
After a $14,600 standard deduction
Social Security
Fully exempt
State treatment only; federal rules still apply
401(k) / IRA withdrawals
Fully taxable
Pension income
First $2,500 exempt
Effective property tax
0.47%
$2,360 on a $500,000 home
Combined sales tax
8.52%
State plus average local rate
Homeowners insurance
$1,018/yr
Average annual HO-3 premium
Cost index (goods & services)
99.5
US average = 100, BEA 2024. Housing excluded.
Estate / inheritance tax
Neither
Cost index compares goods and services only — housing is excluded because it's captured separately in property tax. Source: BEA Regional Price Parities, 2024, US average = 100.
Rankings and dollar figures on this page use one documented profile: $126,000 of gross retirement income ($36,000 Social Security, $45,000 in 401(k)/IRA withdrawals, $18,000 pension, $12,000 dividends, $15,000 part-time earnings), a $650,000 home, and $32,000 of taxable annual spending. It is the same profile the calculator loads with, so you can reproduce every number here.
Where Arizona ranks
Arizona places 7 of 50 states by total state tax burden on the standard profile — $7,617 a year against a $10,910 50-state average, or 30% below the 50-state average.
- State income tax rate2.50%42% below the 50-state average
- Effective property tax rate0.47%48% below the 50-state average
- Combined sales tax rate8.52%28% above the 50-state average
- Homeowners insurance premium$1,018/yr32% below the 50-state average
- Cost of goods & services99.5in line with the 50-state average
Comparisons are unweighted averages across the 50 states on our standard retiree profile, not population-weighted national figures.
How it compares to its peers
The states closest to Arizona on total burden, using the same profile:
Florida
Rank 5 · $6,881/yr
$736 less than Arizona
Florida retirement taxesGeorgia
Rank 6 · $7,609/yr
$8 less than Arizona
Georgia retirement taxesAlaska
Rank 8 · $7,687/yr
$70 more than Arizona
What this means for a move
On the standard profile, 40% of the $7,617 annual burden in Arizona is property tax — $3,068, against $2,726 of sales tax and $1,823 of income tax. Raising or lowering taxable withdrawals changes the 2.50% income tax line directly, so the total is sensitive to how much you draw each year.
Every $100,000 of home value costs $472 a year in Arizona property tax, so a $500,000 house carries roughly $2,360. Average homeowners insurance runs $1,018 a year, 32% below the 50-state average. Goods and services price 0.5% below the US average (BEA 2024, housing excluded), which sits on top of the tax figure rather than inside it.
Arizona retirement tax FAQ
Does Arizona tax Social Security benefits?
No. Arizona does not tax Social Security benefits at the state level. Federal taxation of benefits still applies based on your combined income.
How does Arizona tax 401(k) withdrawals and pension income?
401(k) and IRA withdrawals: fully taxable. Pension income: first $2,500 exempt. Anything left over is taxed at an effective 2.50%.
What is the property tax rate in Arizona?
Arizona's effective property tax rate is 0.47% of home value — 48% below the 50-state average. On a $500,000 home that is about $2,360 a year.
Where does Arizona rank for retirement taxes?
Arizona ranks 7 of 50 states, lowest total burden first, on our standard retiree profile: $7,617 a year in combined state income, property and sales tax, versus a $10,910 unweighted average across the 50 states.
Compare Arizona to your current state
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