Rental Tax Relief Law Launches New Year: Key Changes Effective January 1

By Daniel Stefanski |

Arizona’s efforts to alleviate the financial burden on renters have officially taken a significant step forward. On November 27, Senate President Warren Petersen announced that rental taxes will no longer be included in tenant bills following a recent legislative change. This comes after the passage of a bill that eliminates the transaction privilege tax on rent, set to take effect on January 1, 2025.

Petersen emphasized the importance of this repeal as part of a broader strategy to provide inflation relief to Arizonans. He stated, “It’s happening. Renters are about to get relief from the rental tax repeal passed by the Republican-led legislature.” This legislative action was critical to securing the governor’s signature, albeit with a delayed effective date. He reassured constituents that the GOP maintained control of both the Senate and House, countering fears of a tax reinstatement under potential Democratic leadership.

Senator Shawnna Bolick highlighted the personal connection behind the initiative, recalling a conversation with a southern Arizona resident who urged her to address the rental tax issue. She hinted at future efforts to tackle additional taxation concerns, stating, “Stay tuned.”

Representative Travis Grantham joined the conversation, expressing gratitude for the collaborative effort behind the repeal: “So happy we made this happen. Wouldn’t have happened without you endlessly pushing for it!”

This development follows the signing of SB 1131 by Governor Katie Hobbs in August 2023, which formally abolished the rental tax for tenants. Senate Republicans noted that around 70 municipalities imposed this tax, even as state-shared revenues surged significantly over recent years, with reported growth of $733 million from fiscal years 2019 to 2023.

Initially, Governor Hobbs had vetoed an earlier iteration of the rental tax prohibition, citing concerns over enforceability and the assurance of actual relief for renters. Despite opposition from the League of Arizona Cities & Towns and various municipalities, the bill gradually passed through the legislature, culminating in its approval and transmission to the governor this summer.

As Arizona prepares for this significant shift in rental taxation, the implications for residents’ monthly bills and broader economic impacts remain to be seen. The move reflects ongoing efforts by state lawmakers to create a more favorable living environment for renters across the state.