Does Arizona Tax Retirement Income?

No. Arizona does not tax Social Security benefits.

Social Security benefits are subtracted from Arizona income.

The Arizona answer is separate from the federal one. Depending on combined income, up to 85% of Social Security benefits can be taxable on the federal return regardless of what Arizona does, so the state rule changes the state line only. Our guide to states that do not tax Social Security shows where Arizona sits among the states that still tax benefits.

Partly. Arizona taxes some pension income, subject to an exclusion or age rule.

Private pensions are generally taxable. Up to $2,500 of qualifying federal, Arizona state, or Arizona local government pension income may be subtracted.

The commonly cited $2,500 subtraction is limited to specified government pensions. It is not a blanket exclusion for every pension or retirement account.

Public and private pensions, annuities, and retirement-plan distributions do not always get the same treatment. The pension comparison lists which states exempt pensions broadly, partly, or only for certain plans.

Yes. Arizona generally taxes traditional 401(k) and IRA withdrawals.

Traditional IRA and 401(k) withdrawals are generally taxable when included in federal adjusted gross income.

Two timing points matter in Arizona. A Roth conversion is taxable in the year it is done, and Arizona starts from federal adjusted gross income, so a large conversion can land in a year when the state exclusion does not cover it. Qualified Roth withdrawals later are generally not taxable at either level. Required minimum distributions follow the same Arizona rules as any other traditional-account withdrawal.

Every state page on this site runs the same retiree profile so the states can be compared: $30,000 of Social Security, $40,000 withdrawn from a traditional 401(k), and a $20,000 private pension, $90,000 in total.

A retiree with $30,000 of Social Security, $40,000 from a 401(k), and a $20,000 private pension generally excludes the Social Security but starts with $60,000 of Arizona-taxable retirement income. The $2,500 government-pension subtraction would not apply to the private pension in this example.

Start with federal AGI of about $85,500, which already excludes the nontaxable 15% of Social Security. Arizona then subtracts the $25,500 of federally taxable Social Security, leaving $60,000 of 401(k) and private pension income. The $2,500 pension subtraction does not apply because the pension is private, not a government plan. After an Arizona standard deduction that tracks the federal amount, roughly $16,000 for a single filer, about $44,000 is taxable at 2.5%, so the Arizona bill is roughly $1,100. Contrast: a $150,000 lump-sum IRA withdrawal in the same year adds a flat $3,750 (2.5% of $150,000) with no bracket creep, and if the $20,000 pension had come from the Arizona State Retirement System instead of a private employer, the $2,500 subtraction would have saved only about $63.

The same $90,000 profile looks different a state line away. The rows below come from the reviewed 51-state table; each state name links to its own guide.

• Nevada: has no individual income tax at all.
• Texas: has no individual income tax at all.
• Colorado: treats Social Security as partially taxed, pensions as partially taxed, and 401(k) and IRA withdrawals as partially taxed, with a top rate of 4.40% and retirement subtraction up to $20,000 or $24,000.

Arizona competes with Nevada for retirees, but the income-tax result is different. Nevada has no individual income tax; Arizona has a low rate that still reaches most private retirement distributions.

Military retirement: Arizona allows a subtraction for qualifying U.S. Armed Forces retirement pay. See the military retirement tax map for every state's treatment.

Estate and inheritance tax: Arizona has no separate estate or inheritance tax.

Selling a home or investments in Arizona: retirement-income rules do not cover capital gains. See Arizona capital gains tax before selling appreciated property or a brokerage position in the year you move or retire.

• Confirm the exclusion you are claiming. The commonly cited $2,500 subtraction is limited to specified government pensions. It is not a blanket exclusion for every pension or retirement account.
• Part-year residents. If you moved into or out of Arizona during the year, retirement income is generally allocated to the period of residency, and the former state may still tax distributions received before the move. Document the move date, the new domicile, and where each distribution was received.
• Withholding and estimates. Pension and IRA custodians often withhold federal tax but not Arizona tax. If Arizona taxes any part of your retirement income, check whether quarterly estimated payments are needed to avoid an underpayment penalty.
• Federal side. The federal return has its own rules: up to 85% of Social Security can be taxable, the temporary $6,000 federal senior deduction is available for 2025 through 2028 subject to income limits, and Roth conversions are taxed in the conversion year. State exemptions do not change any of that.
• Large one-time distributions. Separate government pension dollars from private pension and account withdrawals before estimating the Arizona bill. Applying the $2,500 subtraction to the wrong stream creates a false result.

Comparing states before a move? Use the retirement taxes by state table and the moving states tax guide, and read retirement tax planning for how distributions, conversions, and a move are sequenced together.