Moving to Phoenix changes which state taxes your income. Arizona has a flat individual income tax, and the year you move you will usually file as a part-year resident. This guide explains the basics in plain language. It is general information, not tax advice. Tax rules change, so confirm details with the Arizona Department of Revenue or a tax professional.
Key takeaways
- According to the Arizona Department of Revenue, Arizona has a flat individual income tax rate of 2.5 percent.
- People who become Arizona residents during the year usually file Form 140PY, the part-year resident return.
- Your move date matters, because it helps decide which income each state can tax.
How Arizona income tax works
Arizona taxes the income of its residents and Arizona-source income of nonresidents. Since tax year 2023, according to the Department of Revenue, Arizona uses a single flat rate of 2.5 percent rather than several brackets. Your Arizona taxable income starts from your federal figures, with Arizona adjustments, deductions and credits.
The year you move: part-year residents
If you become an Arizona resident partway through the year, you are generally a part-year resident for that year. The Department of Revenue says Form 140PY is used to report all income earned while an Arizona resident, plus any Arizona-source income earned before moving to the state. Income you earned while living in your old state, from sources there, generally belongs on that state’s return.
Full-year vs part-year resident
| Full-year resident | Part-year resident | |
|---|---|---|
| Who | Lived in Arizona all year | Moved in or out during the year |
| Form | Form 140 or a simpler version | Form 140PY |
| Income taxed by Arizona | All income | Income while a resident plus Arizona-source income |
Which one applies to you
If you moved to Phoenix in, say, June, you will usually file a part-year return for that year and a full-year return the following year. Your old state may also require a part-year return. People who keep ties to two states, such as a home or business in each, should get professional advice.
Tip: Write down your exact move date and keep records such as your lease, moving receipts, new license and first utility bill. They support the date you use on both states’ returns.
Withholding at a new job
If you start working in Arizona, your employer will withhold Arizona income tax. Arizona uses its own withholding election form, so you choose a withholding percentage rather than relying only on the federal form. Review it when you start the job so you do not end up owing a lot, or overpaying, at tax time.
Remote workers
If you move to Phoenix but keep working remotely for an employer in another state, ask your employer to update your work location. Which state withholds tax depends on where you work and the rules of each state. Some states have their own rules for remote employees, so check both states’ guidance.
Other Arizona taxes to know
- Sales tax is a transaction privilege tax that combines state, county and city rates.
- Property taxes are handled by the county assessor and treasurer.
- Vehicle license tax is paid at registration and is based on the vehicle’s value.
Self-employed and business owners
If you run a business or work for yourself, the move affects more than your personal return. Income from a business you operate in Arizona is generally Arizona-source income. If your business is a separate entity, such as an LLC or corporation, it may have its own Arizona filing and registration duties. Our business guides, starting with Moving a Business to Phoenix: A Step-by-Step Checklist, explain the registration side. For the tax side, a tax professional familiar with both states is worth the cost in the year of the move.
Estimated payments
If you have income that is not subject to withholding, such as self-employment, investment or rental income, you may need to make estimated tax payments to Arizona. The Department of Revenue explains who must make them and when. Missing them can lead to penalties, so check early in your first year.
What records to keep
Keep your final pay stubs from your old job and your first ones in Arizona, your W-2 forms, records of other income such as interest or rental income, and anything showing your move date. If you sold a home in your old state, keep the closing statement. Good records make a part-year return far simpler.
Common mistakes
The most common mistake is filing as a full-year resident in the year of the move, or forgetting the return in the old state. Another is not updating withholding at a new job. People who work remotely sometimes let the old state keep withholding after they have moved. Review your first paycheck after the move carefully.
Frequently asked questions
What is Arizona’s income tax rate?
According to the Department of Revenue, a flat 2.5 percent since tax year 2023.
Which form do I file the year I move?
Usually Form 140PY, the part-year resident return.
Do I file in my old state too?
Often yes, as a part-year resident there. Check that state’s rules.
For the other costs of living here, read Phoenix Cost of Living: What to Budget For. If you are bringing a business, see Moving a Business to Phoenix: A Step-by-Step Checklist.