According to Kiplinger.com, the answer is a resounding yes.
In fact, Arizona is ranked as one of Kiplinger’s Top Ten most tax-friendly states for retirees.
Let’s take a closer look at the reasons why.
Arizona State Sales Tax
Arizona’s state sales tax is 5.6%, but many counties and cities can add to that. The average combined sales tax rate comes out to about 8%. Arizona as a state does not tax food for home consumption, but most cities do. Of particular interest to many retirees, Arizona does not tax drugs prescribed by a licensed physician or dentist.
Arizona State Income Tax
While many popular retirement states (like Florida) have no state income tax, Arizona does, but it is considered fairly low, topping out at about 4.5%.
Social Security benefits are not taxed.
Arizona Property Taxes
The main thing people seem to be concerned about when choosing a place to retire is property taxes.
According to Kiplinger, in Arizona, the median property tax rate is $644 per $100,000 of assessed home value.
When it comes to property tax breaks specific to retirees, Kiplinger goes on to say:
Homeowners who are at least 65 years old, have lived in their primary residence for at least two years and fall below certain income limits (for the 2022 program, one owner of a property must have total income of $40,368 or less, and multiple owners of a property must have combined income of $50,460 or less) can have the valuation of their property frozen for three years. The freeze can be renewed every third year.
Homeowners who are at least 70 years old, have either resided in their primary residence for at least six years or have lived in the state for at least 10 years, and do not receive more than $10,000 of taxable income per year can defer their property taxes.
A property tax refund credit of up to $502 is available against Arizona income taxes for homeowners or renters age 65 or older with total household income less than $3,751 for seniors who live alone or less than $5,501 for seniors who live with someone.
So there you have it. I think we can agree that if you are considering retirement in Arizona, you should not let fear of the potential tax burdens deter you.
For more information visit Kiplinger.com’s State-by-State Guide to Taxes on Retirees.
