How Arizona taxes retirement income

Some 2026 figures pending confirmation Tax year 2026 · research last updated October 2, 2026

Arizona doesn't tax Social Security benefits.
Exclusions and subtractions for retirement income (details below):
- Senior subtraction conforming to federal IRC 151: from age 65, a dollar limit (see below), income limits apply.
- U.S. government / Arizona public pension subtraction: at most $2,500 per person.
Rates for 2026: 2.5% flat rate.

At a glance

Income tax	Yes
Rates (2026)	2.5% flat rate
Starts from	Federal adjusted gross income (AGI)
Standard deduction	$16,100 single, $32,200 married filing jointly
Age 65 and older	$2,100 extra exemption per person
Social Security	Not taxed
Retirement income exclusions	2 (see below)
Roth conversions	Taxable
Capital gains	Special treatment (see below)
Local income tax	None

Arizona doesn't tax Social Security benefits.

Pensions, IRAs and 401(k)s

Senior subtraction conforming to federal IRC 151(d)(5)(C) 'enhanced deduction for seniors' (A.R.S. 43-1022(35), added by Laws 2026 ch. 140 / HB 4168)

Age: 65+ · Applies to: any income (not limited to retirement income)

Subtract the amount deducted on the federal return for each qualified individual (65 by the end of the tax year, valid SSN; joint filing required if married) under IRC 151(d)(5)(C). Retroactive to tax years beginning after 2024; tied to the federal deduction, which exists only for 2025-2028.

Income limit: Same as federal: the $6,000 per qualified individual is reduced by 6% of modified AGI over $75,000 ($150,000 joint); subtraction equals the amount actually deducted federally under 151(d)(5)(C).

U.S. government / Arizona public pension subtraction (A.R.S. 43-1022(2))

Limit: $2,500 per person · Applies to: pensions

Lesser of the amount received or $2,500 per recipient spouse, only for pensions from the U.S. civil service/foreign service or other federal retirement systems, the Arizona State Retirement System, CORP, PSPRS, EORP, ABOR/community college optional retirement programs, or an Arizona county/city/town plan. Private pensions, 401(k)/403(b) and IRAs get nothing. Military retired pay is fully subtracted separately (43-1022(26)).

Roth conversions

A Roth conversion counts as taxable income for Arizona. Whether a retirement income exclusion can cover part of it depends on the rules above.

Capital gains

Mostly ordinary at 2.5%, but 25% of net long-term capital gain from assets acquired after December 31, 2011 is subtracted (Form 140 line 24; A.R.S. 43-1022). Short-term gains and gains on pre-2012 assets get no subtraction.

Credits and relief for older residents

Property tax credit (Form 140PTC). Age 65+ (or SSI recipient), full-year resident, paid AZ property tax or rent, household income under $3,751 living alone or $5,501 with others (2025 Form 140 instructions). Small credit via Form 140PTC; very rarely relevant.
Standard deduction charitable increase. For 2026+ a standard-deduction filer may add actual charitable contributions, capped at $1,000 (single/MFS) or $2,000 (joint) (A.R.S. 43-1041(I)(2)). 2025 rule was 25% of charitable deductions.

More detail from our research notes

Flat 2.5% (A.R.S. 43-1011; confirmed for 2026 by the 2026 Form 140ES booklet). Starts from federal AGI. Social Security and Tier 1/2 railroad retirement included in federal AGI are fully subtracted (A.R.S. 43-1022(10)). No general retirement income exclusion: IRA, 401(k) and private pension income is taxable except the $2,500 public-pension subtraction. Age 65+ gets an exemption of $2,100 per taxpayer/spouse age 65 before the close of the tax year (A.R.S. 43-1023; Form 140 line 38); blind $1,500. Standard deduction: Laws 2026 ch. 140 (HB 4168, signed June 13 2026) sets $15,750 single/MFS, $23,625 HoH, $31,500 joint in A.R.S. 43-1041(A) (retroactive to 2025); 43-1041(H) indexes these 'in the same manner in which the federal basic standard deduction is adjusted' each year, so the 2026 values above are the federal 2026 basic amounts ($16,100 / $32,200 / $24,150, Rev. Proc. 2025-32) - derived, not yet printed by ADOR. Arizona does NOT adopt the federal additional standard deduction for age 65/blind; the $2,100 exemption applies instead. The new senior subtraction is in addition to the $2,100 exemption. Arizona conforms to the IRC as of Jan 1 2026.

Pending confirmation

These points were still being confirmed against Arizona's published 2026 forms when this page was built. Most are waiting on forms the state publishes around the turn of the year.

4 items

2026 standard deduction $16,100 / $32,200 / $24,150 is derived from A.R.S. 43-1041(H) (federal-style indexing of the 2025 amounts); ADOR has not printed it. Expected on the 2026 Form 140 instructions (Dec 2026-Jan 2027): https://azdor.gov/forms/individual-income-tax-forms
Senior subtraction details (phase-out, qualified-individual rules) are inferred from the federal IRC 151(d)(5)(C) definition the Arizona statute (43-1022(35)) cross-references; no ADOR form line or instructions yet (expected with the 2026 Form 140 instructions, Dec 2026-Jan 2027).
Property tax credit amount schedule (Form 140PTC) not researched; only eligibility thresholds confirmed.
Roth conversions: no special Arizona treatment found; taxable to the extent in federal AGI.

Sources

Every figure comes from these documents, mostly the state's own forms, instructions and statutes.

Laws 2026 ch. 140 (HB 4168) text: A.R.S. 43-1022 (pension $2,500, SS, senior subtraction para 35), 43-1041 (standard deduction, indexing, charitable increase), retroactivity sec. 35https://www.azleg.gov/legtext/57leg/2R/laws/0140.pdf
HB 4168 / SB 1861 enacted fact sheet (chapter 140, signed June 13 2026)https://www.azleg.gov/legtext/57leg/2R/summary/S.1861-4168ATT_ASENACTED.DOCX.htm
A.R.S. 43-1023(E): age 65 exemption $2,100, a fixed amount with no indexing clause (read 2026-10-02)https://www.azleg.gov/ars/43/01023.htm
A.R.S. 43-1022 subtractions (SS para 10, $2,500 pension para 2)https://www.azleg.gov/ars/43/01022.htm
2025 Form 140 instructions: 2.5% rate, age 65 $2,100, $2,500 public pension, 25% LTCG subtraction, property tax credit; Itemized deductions and charitable standard-deduction increase: Laws 2026 ch. 140 (HB 4168) secs. 16-17, A.R.S. 43-1041(I)(2) ($1,000/$2,000) and 43-1042(B) full medical, (D) $10,000 SALT limit ; 2025 Form 140 line 44 34%https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2025_140i.pdf
2026 Form 140ES booklet: 2026 rate 2.5%https://azdor.gov/sites/default/files/document/FORMS_INDIVIDUAL_2026_140ESBooklet.pdf

Taxtirement's Arizona calculation is also checked against a second, independent implementation on 1,000 random households. How we check our numbers.

See your own years. Taxtirement applies these Arizona rules, and the federal and Medicare rules, to your household for every year of retirement, and shows the calculation behind each number. Coming November 2026 for iPhone, iPad and Mac.

This page summarizes Arizona's 2026 rules as Taxtirement applies them, for education and planning. It isn't tax advice, and it doesn't cover every situation (for example part-year residents, businesses or military-only provisions). Rules change; check the state's current instructions, or a tax professional, before you act. Spotted something wrong? Tell us.