Property Management Taxes In Arizona

This guide covers the taxes that actually apply to a property management company operating in Arizona, and to the rental income it handles on behalf of owners. Every figure below is tied to the statute, agency rule, or published guidance that sets it, so you can confirm a rate or deadline before acting on it.

Sales Tax On Rent: What Applies And What Does Not

Arizona's sales tax analogue is the transaction privilege tax, a tax on the vendor for the privilege of doing business. Long-term residential rent is now outside the TPT system entirely at every level of government. Short-term lodging and commercial rent are still taxed, the former by the state, counties and cities, the latter only by cities because the state rate on the commercial lease classification is zero.

• Starting January 1, 2025, residential rental property owners should no longer collect and remit any city transaction privilege tax on income from long-term lodging stays of 30 days or more. There is no state or county tax imposed on residential rentals. (Laws 2023, Chapter 204 and A.R.S. § 42-6004(H))
• From and after December 31, 2024 a city, town or other taxing jurisdiction may not levy a transaction privilege, sales, gross receipts, use, franchise or other similar tax or fee on the business of renting or leasing real property for residential purposes, regardless of whether the city has adopted the Model City Tax Code. This does not apply to health care facilities, long-term care facilities, or hotel, motel or other transient lodging businesses. (A.R.S. § 42-6004(H)(1) and (2))
• Hotel, motel and other transient lodging businesses that book stays for fewer than 30 days must still collect and remit TPT under the transient lodging or hotel classification. The state rate on the transient lodging classification is 5.5 percent. (A.R.S. §§ 42-5070, 42-5010(A)(2))
• Short-term rental operators report state and county income under business code 025, city income under business code 044 (hotels), and additional city hotel tax under code 144. Where an online lodging marketplace collects and remits, the owner deducts 100 percent of the marketplace income using deduction code 775 and retains Form 5018 from the marketplace. (ADOR Short-Term Lodging guidance)
• The state transaction privilege tax rate on the commercial lease classification is zero percent, so commercial rent is taxed only at the city level. Phoenix, for example, taxes commercial rental at 2.80 percent plus a 0.10 percent additional commercial lease tax. (A.R.S. §§ 42-5010(A)(4), 42-5069)
• The commercial lease classification excludes leasing or renting dwelling units, lodging facilities or trailer or mobile home spaces intended as the principal or permanent residence of the renter, or leased to a single tenant for 30 or more consecutive days. (A.R.S. § 42-5069(C)(9))

Property Tax

Arizona property tax is administered by the county assessors and treasurers, with the Department of Revenue supervising and centrally valuing certain properties. Tax is computed on an assessed value that is a statutory percentage of full cash value or limited property value, and the percentage depends on the property's legal class. Rental residential property sits in class four at 10 percent, and commercial property sits in class one, which is stepping down toward 15 percent.

• Class four property, which includes leased or rented residential property, is assessed at 10 percent of its full cash value or limited valuation. (A.R.S. § 42-15004)
• Class three property, owner-occupied residential, is also assessed at 10 percent. (A.R.S. § 42-15003)
• Class one (commercial) assessment ratio is 16 percent for periods after December 31, 2024 through December 31, 2025, 15.5 percent for periods after December 31, 2025 through December 31, 2026, and 15 percent for periods after December 31, 2026. (A.R.S. § 42-15001(15), (16), (17))
• The Business Property Statement (personal property return) must be filed annually on or before April 1 with the county assessor of the county where the property is located, though deadlines, procedures and formats can vary by county. (A.R.S. § 42-15053(A))
• The business personal property tax exemption for tax year 2024 was $248,691 and the amount is increased annually. (A.R.S. § 42-11127(B))
• An Affidavit of Property Value must accompany all real property transfers and sales unless the transaction is exempt, and the date of sale is the date the transfer agreement or contract of sale was signed, not the close of escrow. (A.R.S. §§ 11-1133, 11-1134, 11-1137(B))
• Questions about centrally valued property go to the Department's Centrally Valued Property Unit; all other property questions go to the County Assessor. (ADOR Property Tax FAQs)

Registration And Recordkeeping

Even though the residential rental TPT is gone, Arizona property managers still face registration duties. The county assessor registration under the landlord tenant statutes survives untouched and carries real civil penalties. A property management company that files on behalf of owners uses a no-fee PMC registration license and a Form 285-PMC power of attorney, and must file and pay electronically for its owners.

• An owner of residential rental property must maintain with the county assessor the owner's name, address and telephone number, the responsible officer or member for entity owners, the street address and parcel number, and the year built, and must update the information within ten days of a change. (A.R.S. § 33-1902(A))
• An out of state owner must designate and record a statutory agent who lives in Arizona to accept legal service. Residential rental property may not be occupied if the required information is not on file with the county assessor, and a tenant may terminate the rental agreement after a ten day notice to comply. (A.R.S. § 33-1902(B) and (C))
• Failure to register newly acquired residential rental property can draw a $1,000 civil penalty plus $100 per month, and other non-registration can draw $150 per day, though the court dismisses the complaint if the owner complies within ten days of notice. (A.R.S. § 33-1902(E), (F), (G))
• A PMC that does not own or rent properties and only represents owners should cancel its existing TPT license and apply for a Property Management License. There is no fee to obtain or renew the PMC registration license. (ADOR PMC licensing requirements)
• A Form 285-PMC power of attorney establishes the PMC as the appointee to act on behalf of the property owner in all matters concerning collection and remittance of TPT, and must be completed and kept in the PMC file. PMCs must file and pay electronically on behalf of their property owners. (ADOR PMC guidance, Form 285-PMC)
• When a PMC stops representing an owner it must disengage on the last period, otherwise the PMC remains responsible for filing and paying. If an owner engages multiple PMCs, each property needs a separate license per PMC. (ADOR PMC guidance)
• Tax periods before January 1, 2025 remain subject to filing, payment and audit. Owners who held a TPT license but did not fully report taxable residential rental income must file amended returns. (ADOR Residential Rental Guidelines, periods prior to January 1, 2025)
• Although a TPT license is no longer required for residential rental, a city or town may still require a local business license, which ADOR does not issue. (ADOR Residential Rental Guidelines, Other Business License Requirements)

Recent Changes Worth Tracking

• Laws 2023, Chapter 204 (S.B. 1131) prohibits, beginning January 1, 2025, a city, town or other taxing jurisdiction from levying a tax or fee on the business of residential rentals. (Laws 2023, Chapter 204, Provision 1)
• The same act required landlords to cease charging tenants the amount of the repealed residential rental TPT by January 1, 2025, placed the burden of proof on the landlord in any civil challenge, and repeals that rent reduction requirement on January 1, 2027. (Laws 2023, Chapter 204, Provisions 2 through 4)
• TPT licenses that carried only residential rental (business code 045) were automatically cancelled by ADOR with an effective date of December 31, 2024, and no action is needed by the owner to cancel. (ADOR Residential Rental Guidelines, What Should I Do)
• The class one commercial assessment ratio moves from 16 percent for 2025 to 15.5 percent for 2026 and 15 percent for 2027 and after, so any commercial assessment figure quoted in older content needs re-checking each year. (A.R.S. § 42-15001(15) through (17))
• H.B. 2918 of 2025, which would have reduced the individual income tax rate to 2.47 percent and the state TPT rate to 4.93 percent for 2026, was not enacted. (H.B. 2918, 57th Legislature, 1st Regular Session)
• Cities continue to change transient lodging rates. For example Tucson created a 10 percent rate for transient short-term rentals effective March 1, 2026, so short-term rental operators must track city rate and code updates. (ADOR Rate and Code Updates)

Tax is one half of Arizona compliance. See our guide to Arizona property management laws and regulations for licensing, trust account, and disclosure rules.

This page is one half of the picture. See our guide to how Arizona taxes rental and management income for the rest.

Keeping This Straight

Tax rates and thresholds move more often than most operators expect, and the figures circulating in older articles go stale quickly. Check any rate against its citation before you quote it to an owner, and re-check them at the start of each tax year.

This guide is a starting point for professional managers, not tax or legal advice. For a specific filing, work with a CPA familiar with Arizona rental property, and confirm current figures with the Arizona Department of Revenue or the IRS. None of it works without clean underlying records, which is what residential property accounting is for on a single-family or small multifamily portfolio.

Sources

Every fact above is drawn from one of the official sources below.

• Laws 2023, Chapter 204 and A.R.S. § 42-6004(H), Arizona Department of Revenue, Residential Rental Guidelines
• A.R.S. § 42-6004(H)(1) and (2), Arizona State Legislature, Arizona Revised Statutes § 42-6004
• A.R.S. §§ 42-5070, 42-5010(A)(2), Arizona Department of Revenue, Short-Term Lodging
• A.R.S. §§ 42-5010(A)(4), 42-5069, Arizona Department of Revenue, Phoenix Transaction Privilege Tax and Use Tax Rates
• A.R.S. § 42-5069(C)(9), Arizona State Legislature, Arizona Revised Statutes § 42-5069
• A.R.S. § 42-15004, Arizona State Legislature, Arizona Revised Statutes § 42-15004
• A.R.S. § 42-15003, Arizona State Legislature, Arizona Revised Statutes § 42-15003
• A.R.S. § 42-15001(15), (16), (17), Arizona State Legislature, Arizona Revised Statutes § 42-15001
• A.R.S. § 42-15053(A), Arizona Department of Revenue, Property Tax FAQs
• A.R.S. § 33-1902(A), Arizona State Legislature, Arizona Revised Statutes § 33-1902
• ADOR PMC licensing requirements, Arizona Department of Revenue, For Property Management Companies (PMC)
• Laws 2023, Chapter 204, Provision 1, Arizona State Senate, S.B. 1131 Fact Sheet as passed House
• H.B. 2918, 57th Legislature, 1st Regular Session, Arizona State Senate, H.B. 2918 Fact Sheet
• ADOR Rate and Code Updates, Arizona Department of Revenue, Rate and Code Updates