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Arizona Retirement Taxes - What Retirees Need to Know
In addition to dry air and plenty of sunshine, Arizona has another benefit. It is one of the most tax-friendly states for retirement.
Arizona does not tax Social Security benefits, but it does impose a tax on 401(k) and IRA distributions at the regular flat income tax rate of 2.5%. Some public pension income, up to $2,500, may be deducted from overall income.
Social Security and Pension Taxes
Property Taxes
Arizona property tax rates are below the national average, and some people may be able to freeze their home’s value to prevent future higher taxes.
Sales Taxes
Arizona imposes a state-wide sales tax of 5.6%, although groceries and certain prescription medications are exempt. Local sales taxes can reach 8% and higher.
Inheritance and Estate Taxes
Arizona does not have inheritance tax or an estate tax.
Planning Ahead for Retirement Taxes
When planning your retirement, consider working with a financial advisor familiar with Arizona tax laws. With proper planning, you can maximize your income and enjoy the state’s financial advantages while living in a great town like Flagstaff, Cottonwood, Bisbee, Tubac and many more.
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