Arizona does not charge an estate tax, which is just one of many factors that make it such a popular destination for retirees.
However, the lack of an estate tax does not mean Arizona residents are free from paying taxes altogether. This article will take an in-depth look at Arizona’s estate tax and other taxes that may influence your retirement planning, citing the most up-to-date information from the Arizona Department of Revenue.
If you want more information on Arizona taxes and how they could affect you, call a wealth manager at ARQ Wealth for help at (480) 214-9572.
What is an Estate Tax?
An estate tax is a tax on your assets at the time of your death. This tax can be levied by the federal government, state government, both, or neither, depending on which state you live in as well as the size of your estate.
After you pass on, the government will record the fair market value of all your assets, including cash, property, vehicles, retirement accounts, investments, and personal belongings. This amount—known as the Gross Estate—is then reduced to account for any outstanding debts or qualified deductions. The remaining amount—known as the Taxable Estate—is then taxed at the appropriate rate.
Reducing the amount of your estate that goes to the government is a key aspect of retirement planning. If you’re an Arizona resident and have questions about how to minimize your tax burden throughout this process, then be sure to contact a retirement planning expert at ARQ Wealth team today.
Does Arizona Have an Estate Tax?
Arizona does not have an estate tax, making it one of 38 states that do not charge this tax.
However, Arizona does charge a tax on income received after a person dies if that income is included in a descendant’s adjusted gross income.
For example, if a descendent inherits an IRA from a relative, distributions from that account will be taxed. The same scenario applies to a trust, investment portfolio, or rental property that generates income.
You may also owe estate taxes at the federal level, even though Arizona does not charge estate taxes.
As of 2025, the federal government levies an estate tax if an estate exceeds $13,990,000 for single filers. Federal estate tax rates range from 18% to 40%. This means that you will only pay an estate tax if the sum of all your assets and property is worth more than $13,990,000.
However, thoughtful estate and retirement planning strategies can help minimize your estate tax burden and maximize the amount of your estate passed to your heirs.
Other Arizona Taxes to Know
Outside of estate tax, other types of taxes can affect how much your family, friends, or other benefactors may receive.
Does Arizona Have an Inheritance Tax?
There is no Arizona inheritance tax. If you inherit money within the state of Arizona, then you will not have to pay a tax.
However, you may still have to pay an inheritance tax if your family or loved ones live in another state. This is because some states have inheritance taxes that can apply to out-of-state heirs.
Does Arizona Have a Gift Tax
There is no Arizona gift tax. The federal government has a gift tax exclusion of $18,000 per person and allows for a total lifetime gift exclusion of $13.61 million as of 2024.
Final Thoughts: Arizona Estate Planning
Arizona is a very attractive state from a tax perspective, especially for retirees. In addition to the lack of inheritance or estate taxes, Arizona is financially attractive for the following reasons:
- Social Security benefits are not taxed.
- Income taxes are taxed at just 2.5%, one of the lowest rates of any state.
- The effective property tax rate is just 0.63%, lower than the national average.
Depending on where they are moving from, many retirees stand to benefit financially by moving to Arizona. Arizona is also a great place to live if you love sunshine, the outdoors, and a relatively low cost of living.
You can read more about life in Arizona here.
Additionally, even though Arizona has no estate or inheritance tax, it’s still important to speak with a professional financial planner. A financial planner can offer more personalized advice about the implications of life and taxes in Arizona.
If you’re looking for an Arizona-based financial planning team, then look no further than ARQ Wealth Advisors. ARQ Wealth is a nationally recognized wealth management firm with roots in Arizona, specifically Scottsdale. Our team is highly knowledgeable about the pros and cons of living in Arizona and offers a comprehensive suite of services, including wealth management, retirement planning, investment strategy, and more.
We hope you’ve found this article valuable when learning about Arizona’s estate tax!
