Overview of Arizona Taxes
Arizona has an income tax rate between 2.55% and 2.98% and no local income tax.
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Arizona Paycheck Calculator
Arizona Paycheck Quick Facts
- Arizona income tax rate: 2.55% - 2.98%
- Median household income: $70,821 (U.S. Census Bureau)
- Number of cities that have local income taxes: 0
How Your Arizona Paycheck Works
Like every other state, employers in Arizona withhold federal income and FICA taxes from your paychecks. That money goes to the IRS, who then divvies it up into Social Security, Medicare and, of course, your annual income taxes. Based on the information you provide on your W-4 form (which you need to fill out every time your filing status changes or you get a new job), your employer will withhold a certain amount of taxes.
In recent years, the IRS has made adjustments to the Form W-4. So if it's been some time since you've checked your W-4, you may want to do so to ensure that all of your information is up to date. This new W-4 removes the use of allowances, along with the option to claim personal or dependency exemptions. Filers will have to enter dollar amounts instead of the number of withholding allowances. The dollar amounts will represent income tax credits, non-wage income, itemized and other deductions and total annual taxable wages. The updated form also features a five-step process that allows filers to enter personal information, claim dependents, indicate any additional income and more. These alterations will primarily affect those adjusting their withholdings and changing jobs.
Making pre- and post-tax deductions will also impact how much is withheld from your paycheck. For example, if your employer has a 401(k) plan and you utilize it, your contributions will come directly out of your paycheck. The money you contribute to a 401(k) plan will be deducted before taxes are taken out. This lowers your taxable income and could be a good way for you to save on your taxes until retirement. You could also put money in a health savings account (HSA) or flexible spending account (FSA). Again, this money will be deducted from your checks pre-tax.
Single taxpayers and those married filing separately in Arizona will get taxed at a rate of 2.55% for income under $28,653 and 2.98% for income above that. Joint filers and heads of household will pay a rate of 2.55% for income under $57,305 and 2.98% for income above that.
If you work in certain industries, your employer might not have to withhold Arizona taxes. If you have a spouse in the Armed Forces who is in Arizona on military orders, then you might be exempt. You will need to prove that you’re in the state solely to join your spouse and that you and your spouse maintain a domicile in another state. Other industries that are exempt from withholding include seasonal agricultural workers, motion picture production employees or non-residents who are in Arizona temporarily to help with disaster recovery.
A financial advisor can help you understand how taxes fit into your overall financial goals. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
How You Can Affect Your Arizona Paycheck
One of the simplest ways to change the size of your paycheck is to ask your employer to withhold a certain dollar amount each pay period. If you think you might owe a lot come tax season, you can get more withheld from each paycheck throughout the year. All you have to do is specify a dollar amount to be withheld on the appropriate line of the W-4. If you can afford to have a smaller paycheck, you might thank yourself later when you end up avoiding paying a huge lump sum in April.
If you work overtime, keep in mind that you may actually be taking home a smaller paycheck than you expect if your extra income pushes you into a higher tax bracket. Do some quick calculations to see if the extra hours are worth it for your situation.
As is mentioned above, modifying your pre-tax contributions will also affect the amount of taxes withheld. Think about saving more in your retirement accounts or medical accounts.