Does Arizona Tax Social Security Income?
Understand Arizona's distinct tax treatment for Social Security and other retirement income to accurately determine your state tax obligations as a retiree.
For individuals residing in or considering a move to Arizona, understanding how the state treats retirement income is an important part of financial management. The state’s tax rules can directly influence your net income during retirement, so this guide provides a focused look at Arizona’s approach to taxing these funds.
State-Level Taxation of Social Security Benefits
Arizona does not impose a state income tax on Social Security retirement benefits. This same tax-free treatment is extended to benefits received under the federal Railroad Retirement Act. This complete state-level subtraction simplifies tax planning for retirees who rely on these income sources.
While Arizona forgoes taxing these benefits, a portion of your Social Security income may still be subject to federal income tax. The federal government uses a calculation based on your “provisional income,” which includes your modified adjusted gross income, half of your Social Security benefits, and any tax-exempt interest you received.
For the 2025 tax year, if your provisional income as a single filer is between $25,000 and $34,000, up to 50% of your Social Security benefits could be federally taxed. This threshold is $32,000 to $44,000 for couples filing jointly. If your provisional income exceeds these upper limits, up to 85% of your benefits may be taxable by the federal government.
Tax Treatment of Other Retirement Income
Beyond Social Security, Arizona applies specific tax rules to other common sources of retirement income. Retirement pay from the U.S. armed forces is entirely exempt from Arizona state income tax.
A more limited exemption is available for retirees receiving pensions from U.S. government civil service or from Arizona state and local government pension plans. Individuals receiving income from these sources can subtract up to $2,500 annually from their Arizona gross income. If married and filing a joint return, each spouse may subtract up to $2,500 of their own qualifying pension income.
In contrast, distributions from private-sector retirement plans are generally fully taxable in Arizona. This includes withdrawals from 401(k)s, 403(b)s, and traditional IRAs, as well as pension income from other states. This income is taxed at the state’s flat 2.5 percent income tax rate. The only exception is for any portion of a distribution that can be traced back to after-tax contributions, which is considered a return of principal and is not taxed.
Claiming Retirement Income Subtractions on the Arizona Tax Return
Claiming Arizona’s retirement income exemptions begins with your federal adjusted gross income (AGI). Since federal AGI may include federally taxed Social Security and other retirement income, these amounts must be subtracted on the Arizona Resident Personal Income Tax Return, Form 140.
On Form 140, you will use a designated line to subtract the full amount of any Social Security or Railroad Retirement benefits included in your federal AGI. A separate line is used to claim other qualifying retirement subtractions, such as exempt military retirement pay and the subtraction for federal civil service and Arizona government pensions.