Using tax brackets is one of the most effective ways to calculate your state income taxes. The process involves dividing your taxable income, which is the sum of your earned and investment income minus deductions and adjustments, into different tax levels or “brackets.” Each level has a different marginal tax rate, with taxpayers in higher brackets paying more tax than those in lower brackets. Beginning with the 2023 tax year, Arizona will have a single flat individual income tax rate of 2.5%. The state also has a sales tax and property taxes.
Almost everyone who works in the state will pay taxes, though which types and at what rates depend on your situation. The most common types of state taxes include personal income taxes, sales and excise taxes, and property taxes. Some states have additional types of taxes, like vehicle license fees and business taxes. In most cases, you’ll need to file a state tax return if your taxable income is above the standard deduction amount for your filing status. That’s why it’s important to know which tax bracket you are in, and which ones you can claim.
Before SB 1828 passed into law, Arizona had four separate income tax brackets. Those brackets ranged from 2.59% to 4.5%, and each one had a lower threshold than the previous one. The progressive structure gave people a natural disincentive to continue to earn more income, as they would be hit with increasingly punitive rates until they reached the highest marginal rate.
Arizona Income Tax Brackets 2024
Arizona actually switched to a flat tax system in 2023. This means there are no longer any income brackets for state income tax. Everyone who files an Arizona tax return pays a flat rate of 2.5% on their taxable income. This applies to income earned in 2023 that is reported on your 2024 tax.
In Summary, 2023 a New Tax Rate of 2.5% for all Income Levels and Filing Status.
