Starting January 1, Arizona Renters Get a Major Tax Break!

Arizona lawmakers have initiated a repeal of the transaction privilege tax (TPT) for rental properties, a move aimed at alleviating the burden of rising housing costs. This will take effect on January 1, providing potential financial relief for tenants across the state.

From the start of the new year, property owners are required to discontinue the collection of residential rental taxes. The Arizona Department of Revenue will automatically cancel TPT licenses related exclusively to the residential rental code.

The tax rates vary by municipality, which means that the extent of relief will depend on the local rental tax structure. For example, rental tax in Phoenix was previously set at 2.3%, while Mesa’s rate stood at 2%.

This tax applied to residential leases lasting 30 or more consecutive days. Although owners will no longer collect the tax, they must still register their properties with the county assessor to comply with local landlord-tenant regulations.

The repeal was pushed primarily by Republican lawmakers who aimed to tackle the escalating housing costs. However, some municipalities expressed concerns that removing the tax could significantly impact their budgets.

Initially, Governor Katie Hobbs was opposed to the repeal, arguing it didn’t ensure significant financial benefits for renters. Despite her initial reservations, she ultimately approved the tax elimination.