Arizona does not tax Social Security benefits

Arizona exempts all Social Security income from state income tax. This means if you live in Arizona and receive Social Security payments, you will not owe state tax on those benefits, regardless of your total income or filing status.

This exemption applies to retirement benefits, survivor benefits, and disability benefits paid by Social Security. It also applies to any lump-sum payment you may receive if you were not receiving benefits and then became may have access to to them.

The federal government may still tax your Social Security benefits depending on your combined income (Social Security plus other income), but Arizona itself will not. This is an important distinction because some states tax Social Security while others do not.

Key Takeaways

  • Arizona does not tax Social Security retirement, survivor, or disability benefits at the state level.
  • The federal government may still tax your Social Security benefits if your combined income exceeds certain thresholds, even though Arizona does not.
  • You do not need to report Arizona state tax on Social Security income when you file your state return.
  • If you moved to Arizona from another state, check whether your previous state taxed Social Security, as this may affect past returns.

How federal taxation of Social Security works

While Arizona does not tax Social Security, the federal government may. Whether you owe federal tax on your benefits depends on your combined income, which includes your Social Security benefits plus other income such as wages, pensions, interest, and dividends.

The IRS uses a formula based on "combined income" thresholds. For 2024, if you are single and your combined income is between $25,000 and $34,000, you may owe tax on up to 50 percent of your benefits. If your combined income exceeds $34,000, you may owe tax on up to 85 percent of your benefits. For married couples filing jointly, the thresholds are $32,000 and $44,000.

These thresholds have not changed since 1984, so they affect more people now than they did when they were first set. You can use the Social Security Administration's online calculator or speak with a tax professional to estimate your federal tax liability.

What to report on your Arizona state tax return

When you file your Arizona state income tax return, you do not report Social Security benefits as income. Arizona Form 140 (the individual income tax return) does not include a line for Social Security income, and you should not include it in your total income calculation for state purposes.

If you received a Social Security statement (Form SSA-1099) showing your benefits for the year, keep it for your records, but you will only use it when filing your federal return, not your Arizona return. Some people file federal returns even when they owe no federal tax because they received a refundable tax credit; in those cases, Social Security income still appears on the federal return but not the state return.

If you are unsure whether you need to file an Arizona state return at all, the state's income thresholds are based on age and filing status. You can check the Arizona Department of Revenue website or contact a tax preparer to confirm your filing requirement.

Moving to Arizona from another state

If you recently moved to Arizona from a state that does tax Social Security, you may have paid state tax on your benefits in your previous state. You do not owe Arizona tax on those same benefits going forward, but you may need to file a final return in your previous state for the portion of the year you lived there.

Some states that tax Social Security include Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, and Vermont. If you moved from one of these states, your previous state's tax year may run through December 31, so you may file a part-year return showing income only through your move date.

Keep documentation of your move (such as a lease, utility bill, or change of address confirmation) in case your previous state asks when you established residency in Arizona. This can help you avoid disputes about which state should tax your income.

Social Security and Arizona's tax brackets

Even though Social Security is not taxed in Arizona, other retirement income may be. Arizona taxes wages, pensions, and retirement account withdrawals. If you have income from these sources in addition to Social Security, that other income will determine which Arizona tax bracket you fall into and how much state tax you owe.

Arizona offers a tax credit for residents age 62 and older with limited income, but Social Security is not counted as income for purposes of that credit. The credit is based on federal adjusted gross income, which excludes Social Security. This can make the credit more valuable for retirees who rely heavily on Social Security.

Frequently Asked Questions

Do I have to file an Arizona state tax return if I only have Social Security income?

No. If Social Security is your only income and you are below Arizona's filing threshold for your age and filing status, you do not have to file a state return. Check the Arizona Department of Revenue website for current income thresholds, which vary by age and whether you are single or married.

Will I owe federal tax on my Social Security if I live in Arizona?

Arizona's lack of state tax does not affect federal taxation. You may owe federal tax on your Social Security benefits if your combined income (Social Security plus other income) exceeds the IRS thresholds. Use the Social Security Administration's online calculator or speak with a tax professional to estimate your federal liability.

What if I worked in another state but now live in Arizona and receive Social Security?

Your work history does not determine which state taxes your Social Security. Arizona does not tax Social Security regardless of where you worked. If you moved to Arizona from a state that taxes Social Security, you will not owe that state tax on benefits received after you moved.

Does Arizona tax my spouse's Social Security if we file jointly?

No. Arizona does not tax Social Security for either spouse. If you file a joint Arizona state return, neither your benefits nor your spouse's benefits are included in your state taxable income.

Can I deduct Social Security taxes I paid while working?

Social Security taxes (FICA) paid during your working years are not deductible on either your federal or Arizona state return. They are considered a payroll tax, not an income tax. However, you may be able to deduct certain other retirement-related expenses on your federal return.