How Arizona State Taxes Work
Arizona has the friendliest income tax of any state that has one. Since 2023 it's been a single flat rate, and for 2026 that rate is 2.5 percent, the lowest flat income tax in the country. There are no brackets: every dollar of Arizona taxable income is taxed at 2.5 percent. What makes the real bill even smaller is the deduction that comes first. Arizona uses the full federal standard deduction, $16,100 for single filers and $32,200 for married couples filing jointly in 2026, so a big slice of your income is shielded before the low rate ever applies.
Run a $55,000 single income through it and Arizona taxable income is about $38,900, the state tax comes to roughly $972, and the effective state rate is just 1.8 percent of gross pay. Compare that to Illinois, another flat-tax state: Illinois charges 4.95 percent and gives only a $2,925 exemption, so an Illinois worker on the same salary pays about $1,580 more in state tax. Same idea, very different result, because Arizona pairs a low rate with a generous deduction. Every line, state and federal, is itemized on your pay stub.
What Gets Taken Out of Your Arizona Paycheck
Every Arizona paycheck carries federal income tax, Social Security at 6.2 percent and Medicare at 1.45 percent, the same FICA math as everywhere else, with Social Security capped at the $184,500 wage base for 2026. Arizona's flat tax rides on top at an effective 1.5 to 2 percent for most incomes, one of the smallest state lines you'll see anywhere. If your employer offers health insurance or a 401(k), those pre-tax deductions come out before taxes are figured, which lowers every line that follows. No Arizona city or county charges an income tax, so there's no local line on your stub anywhere in the state.
Form A-4 and the Dependent Credit
Arizona handles withholding differently from most states. Instead of claiming allowances, you use Form A-4 to pick a percentage of your gross pay to withhold, from 0.5 percent up to 3.5 percent. Because the tax is a flat 2.5 percent, choosing the 2.5 percent option keeps your withholding close to your real bill, while a lower percentage means a bigger check now and possibly a balance due at filing. Arizona also gives a dependent tax credit that comes straight off your tax: $100 for each dependent under 17 and $25 for each dependent 17 or older. On a low 2.5 percent base, a couple of kids can wipe out a big share of the state tax entirely.
Hourly Pay and the 2026 Minimum Wage
An hourly wage just gets annualized first. Arizona's minimum wage rose to $15.15 an hour on January 1, 2026, and it adjusts for inflation every January, so it climbs a little each year. Flagstaff and Tucson set their own higher local minimums, so check your city if you work there. At $20 an hour, 40 hours a week is $800, about $41,600 a year, and a single filer at that rate with biweekly checks nets about $1,345 per check, with an Arizona state tax of only around $638 for the whole year. Overtime past 40 hours pays time and a half, and every extra dollar runs through the same lines.
Overtime in 2026: your overtime is withheld like normal wages all year. The federal deduction of up to $12,500 of overtime premium ($25,000 joint, through 2028) is claimed on your federal return. Arizona starts its tax from federal income, so watch the current-year Arizona instructions to see how the deduction flows through to the state. Your W-2 carries the amounts, explained in our guide to
overtime on the W-2 and code TT.
