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Homeโ€บUSโ€บArizona Retirement Tax Calculator

Arizona Retirement Tax Calculator 2026

2.5% flat rate with Social Security fully exempt. Your $65K retirement income = ~$510 in AZ state tax.

Calculate your Arizona state tax on retirement income
$
Annual SS benefit (exempt in AZ)
$
Annual pension payments
$
Annual retirement account distributions
$
Wages, rental, investment income
Your current age
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Arizona's 2.5% flat tax is among the lowest state income tax rates in America. Social Security is fully exempt, making AZ one of the most retirement-friendly states that still has an income tax.

How to Use This Calculator

Tab "Tax on My Retirement Income"

Enter your annual Social Security benefit, pension income (with type: private, government, or military), 401(k)/IRA withdrawals, other income, filing status, and age. The calculator applies Arizona's 2.5% flat tax rate, deducts the standard deduction, and shows your total Arizona state tax on retirement income. Social Security is automatically excluded since Arizona does not tax it.

Tab "What's Exempt?"

A quick-reference table showing which retirement income types are exempt, partially exempt, or fully taxed in Arizona. Social Security is fully exempt. Government pensions receive a $2,500 exemption. Military pensions get up to $3,500 excluded. Private pensions, 401(k)/IRA distributions, and investment income are taxed at the flat 2.5% rate.

Tab "Compare States"

Side-by-side comparison of your Arizona retirement tax with Florida (no income tax), Pennsylvania (retirement income exempt), California (progressive rates up to 13.3%), and North Carolina (4.5% flat). Uses your actual income inputs to calculate each state's tax, so you can see exact dollar differences.

Arizona Retirement Tax Rules (2026)

Arizona Flat Tax Rate: 2.5% on all taxable income

Social Security: Fully EXEMPT — not taxed by Arizona

Pensions & 401(k)/IRA: Taxed at 2.5% after standard deduction
• Government pension: $2,500 exemption
• Military pension: up to $3,500 excluded

Standard Deduction (2026):
• Single / Head of Household: $14,600
• Married Filing Jointly: $29,200

Formula:
AZ Tax = (Taxable retirement income − exemptions − standard deduction) × 2.5%

Arizona switched to a flat 2.5% income tax rate in 2023, replacing the previous progressive system that topped out at 4.5%. This makes Arizona one of the most tax-friendly states for retirees who have significant pension or 401(k) income, since the rate is the same regardless of income level.

Example

$65,000 Retirement Income — Single, Age 68

Social Security$30,000 (exempt)
Private pension$20,000
401(k) withdrawals$15,000
Taxable retirement income$35,000
Standard deduction (single)-$14,600
Arizona taxable income$20,400
Arizona tax (2.5%)$510
Effective rate on total $65K0.8%

With $65,000 in total retirement income, the $30,000 Social Security benefit is fully exempt. The remaining $35,000 in pension and 401(k) income is reduced by the $14,600 standard deduction, leaving $20,400 taxable at 2.5% = $510 per year (about $42.50/month). The effective tax rate on total retirement income is just 0.8%.

Frequently Asked Questions

No. Arizona fully exempts Social Security benefits from state income tax. This includes retirement benefits, survivor benefits, and Social Security Disability Insurance (SSDI). Regardless of your total income or filing status, your SS benefits will never be subject to Arizona's 2.5% income tax. Note that federal taxation of Social Security is separate and still applies based on your provisional income.
Arizona taxes pension income (private, government, and military, though government and military get partial exemptions), 401(k) and IRA withdrawals, annuity distributions, and investment income (dividends, interest, capital gains) at the flat 2.5% rate. These are taxed after subtracting the standard deduction ($14,600 single / $29,200 MFJ). Roth IRA and Roth 401(k) qualified distributions are not taxed since they were funded with after-tax dollars.
Arizona provides a $2,500 annual exemption for government pension income. This applies to pensions from federal, state, and local government service. The exemption is subtracted from your government pension before calculating Arizona income tax. For example, if you receive $30,000 in government pension, only $27,500 would be included in your Arizona taxable income (before the standard deduction is applied).
Yes, Arizona is one of the most retirement-friendly states that still has an income tax. The 2.5% flat rate is among the lowest in the nation, Social Security is fully exempt, and there are exemptions for government and military pensions. While states like Florida, Texas, and Nevada have no income tax at all, Arizona's effective rate on typical retirement income is often under 1%. Combined with warm weather and no estate tax, Arizona consistently ranks among the top retirement destinations.
Arizona allows military retirees to exclude up to $3,500 of military retirement pay from state taxable income. The remaining military pension above $3,500 is taxed at the flat 2.5% rate after the standard deduction. For example, a military retiree receiving $40,000 annually would have $36,500 subject to Arizona income tax. After the $14,600 standard deduction (single), the taxable amount would be $21,900 with a tax of $548. Some states fully exempt military pensions, but Arizona's low flat rate still makes it competitive.

Related Calculators

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Calculate your Arizona paycheck after the 2.5% flat state tax, federal taxes, and FICA.
📈 Social Security Tax Calculator
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Plan your retirement savings gap including Social Security, pension, and investments.
📊 RMD Calculator
Calculate Required Minimum Distributions from your IRA and 401(k) accounts.

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