Arizona renters will receive a gift in the new year: relief from residential rental taxes. Beginning January 1, 2025, Due to a new law recently signed by Gov. Katie Hobbs, Arizonians will not have to pay this municipal tax on their monthly rent.
The change comes after rents have skyrocketed 72% in recent years, according to an Arizona State University report. Other data show that subsequent price increases have led to a state-wide housing shortage of 65,721 units — and counting.
So while Arizonians enjoy residential rental tax relief, renters might not get off scot-free. If you’re looking for additional tax relief and more information on the tax bill, look no further. Here’s what to know.
Arizona rental tax ban in 2025
Arizona’s residential rental tax is a type of transaction privilege tax (TPT). Rent TPTs are sales taxes that most landlords transfer to their renters.
However, beginning Jan. 1, 2025, Arizona property owners will stop collecting this rent tax. The ban will lower renter’s tax bills in municipalities across the state.
Here are some fast facts about the rental tax bill for Arizona renters:
- Residential rental tax rates vary by city, but the average is 2.5%.
- So, for example, if a renter pays $1,400 in monthly rent with a TPT of 2.5%, that translates to $420 saved annually from the new tax bill.
- Landlords are required to lower rent tax bills by the repealed amount in 2025, but they may charge that amount again in 2027. This could be something to watch in future years.
Is the Arizona rental tax going away in my city?
Below are some cities that will not charge residential rental tax in the new year, 2025:
- Phoenix
- Mesa
- Chandler
- Gilbert
- Glendale
- Scottsdale
- Peoria
However, this list is not all-inclusive. Residents can look up their tax rates via the State Department of Taxation’s online tool.
Note: The new rental tax law affects long-term rentals of 30 or more days. Those staying at a hotel, motel, Airbnb, or similar lodging for less than that period may still be subject to a transient lodging or hotel tax.
Arizona housing market crisis
According to the Common Sense Institute of Arizona, a non-partisan research organization, Arizona’s housing crisis is relatively new. Homes were more affordable about five years ago.
Some factors that may have influenced the Arizona housing crisis include:
- Rising prices due to inflation
- Existing homeowners staying put
- Long delays for new construction permits
Due to the housing shortage, the Institute reports that Arizona is behind in new home construction by about 10 years and that the state would need about 41 months to fall back to pre-pandemic pricing.
Many hope the rental residential tax repeal will provide some housing affordability relief for those affected by the housing shortage. However, some remain skeptical, including the cities themselves.
The League of Arizona Cities and Towns, a group representing Arizona cities and towns, opposed the tax ban, citing an estimated $230 million in losses across the state in 2025 alone. League staff plan to meet with the Governor’s staff to discuss alternative ways to make up for lost revenue.
While that conversation could lead to a potential new tax on the horizon (depending on which alternate funding methods are reviewed) there may be a silver lining: Renters can save on taxes in other ways.
Property tax break, tax credit for children, and more ways to save on taxes in 2024
For starters, Arizona residents should take advantage of any state tax credits for which they are eligible:
- Property tax credit. This credit may help 65 or older Arizona homeowners and renters with incomes less than $3,751 ($5,501 if living with others).
- Family income tax credit. Each Arizona resident can claim a personal or dependent exemption of $25, up to a household maximum of $100.
- Public school and school tuition tax credits. For contributions to state schools or tuition organizations (respectively), individuals can receive a potential combined credit on both tax breaks up to $1,859.
See Arizona’s Department of Revenue website for complete eligibility requirements on the above credits.
And finally, don’t forget potential federal tax breaks. Here are ten tax credits and deductions that are often overlooked, as well as a bunch of tax deductions and credits you need to know.
So while you’re ringing in the new year, maybe discover the start of some future tax savings. After all, how often do you get a tax reason to celebrate?
