How Arizona Taxes Retirees

Arizona is NOT as tax-friendly towards retirees as one might think.   Arizona, the home of Barry Goldwater, the Goldwater Institute, the birthplace of real school vouchers etc, is, well was, in many ways about as close as one could come to a libertarian dream state. But not so much anymore. By and large, AZ is still favorable, indeed.  Lots to be optimistic about in their tax code.  But it is getting more and more complex.  And complexity is the enemy of solid financial planning.  From a sales tax perspective you may be inclined to think Arizona isn't that bad.  After all, it's only the 28th highest sale tax state in the nation.  But throw in local sales tax and Arizona ranks #11 in total sales tax rates.  Income tax is better as Arizona does not tax Social Security benefits. , Most retirement income is fully taxed with a small exemption for government and military pensions.  However, unless you are married with over $100k TAXABLE income you're only going to be in the 3% or so bracket.  $25k of Social Security and $50k of retirement income will have a tax bill of less than $1k.  Of course, proper planning can make even this small tax be minimized.  Lastly, property taxes in Arizona are quite low, in the bottom third of the entire nation at only a .70% tax rate.  So, while Arizona isn't as favorable as it probably should be, it's still a rather favorable state for retirees.