Short answer
No. Arizona does not tax Social Security retirement benefits. Social Security benefits included in federal adjusted gross income are subtracted on the Arizona return. However, up to 85% of benefits may still be subject to federal income tax, depending on your combined income.
How does Arizona exclude Social Security from state income tax?
Arizona law allows a subtraction for Social Security benefits that are included in federal adjusted gross income (A.R.S. § 43-1022). In practice, benefits that are federally taxable are removed when calculating Arizona taxable income.
Arizona has a flat individual income tax rate of 2.5%, which applies to other retirement income such as traditional IRA withdrawals, pension income and taxable investment income.
How much of my Social Security can be taxed federally?
The IRS uses "combined income" — adjusted gross income, plus nontaxable interest, plus half of your Social Security benefits — to determine how much of your benefit is taxable.
| Filing status | Up to 50% may be taxable | Up to 85% may be taxable |
|---|---|---|
| Single / head of household | $25,000 – $34,000 | Over $34,000 |
| Married filing jointly | $32,000 – $44,000 | Over $44,000 |
These thresholds are set by statute and are not adjusted for inflation. Married filing separately and living together: generally up to 85% may be taxable.
What other income can affect how my benefits are taxed?
Traditional IRA and 401(k) withdrawals, required minimum distributions, Roth conversions, pension income, capital gains and tax-exempt interest can all raise combined income. Tax-exempt municipal bond interest is not taxed itself, but it is counted when figuring how much of your Social Security is taxable.
Can I have federal tax withheld from my Social Security?
Yes. You can ask the Social Security Administration to withhold federal income tax at 7%, 10%, 12% or 22% using IRS Form W-4V. Arizona does not withhold state tax from Social Security because the benefits are not taxed by the state.
Sources
- Arizona Revised Statutes § 43-1022 (subtractions from Arizona gross income)
- Arizona Department of Revenue — individual income tax information
- IRS Publication 915, Social Security and Equivalent Railroad Retirement Benefits
- IRS Form W-4V, Voluntary Withholding Request
- Social Security Administration — Income taxes and your benefits
This page is informational only and is not individual tax, legal or investment advice. Rules and figures can change; confirm with the cited sources or a qualified tax professional.