By Justin Quen, CPA, Tax Editor
Imagine saving hundreds of dollars a year just for renting out your home. For Arizona property owners, that scenario is now a reality.
On January 1, 2025, Arizona officially eliminated the city Transaction Privilege Tax (TPT) on long-term residential rentals. If you rent out a home, condo, or apartment for 30 days or more, you no longer need to collect or pay local rental tax on that income.
This change simplifies life for landlords across the state and could help ease rental costs for tenants. It’s a win-win for both sides of Arizona’s housing market.
Why This Matters
Until now, cities like Phoenix, Scottsdale, and Tucson charged a TPT — essentially a sales tax — on rental income. That meant property owners had to register for a license, collect the tax from tenants, and file monthly or quarterly returns with the Arizona Department of Revenue.
That’s all changing.
Thanks to an update to A.R.S. § 42-6004(H), city-level TPT no longer applies to long-term rentals. And if your TPT license was only used for that kind of activity, there’s a good chance the Department has already canceled it for you.
“No more collecting city rental tax. No more monthly TPT reports. No more compliance headaches.”
In Phoenix, for example, where the rental tax was 2.3%, a landlord leasing a $2,000/month unit could now save over $550 per year. That’s money that used to go to the city — and now stays in your pocket.
A Boost for Landlords and Renters
This change isn’t just about less paperwork — it’s about meaningful savings.
For landlords, it lowers costs and makes managing properties easier. For renters, it could bring modest relief in monthly housing expenses. Many landlords previously passed TPT costs down to tenants. With the tax now gone, there’s less reason to raise rents just to cover fees.
At a time when housing costs are top of mind for so many Arizonans, this shift represents a step toward affordability and clarity.
What You Still Need to Know
While the elimination of TPT for long-term rentals is great news, here are a few key caveats:
- Short-term rentals (less than 30 days) — like vacation homes — are still subject to TPT and must remain licensed and compliant.
- Past rental activity prior to 2025 is still taxable. If you missed filings or owe back taxes, you still need to catch up.
- County registration is still required. You must continue registering rental properties with your county assessor to remain compliant with landlord-tenant laws.
- Good recordkeeping remains essential — especially in case of an audit for prior years.
What Landlords Should Do Now
- Confirm your TPT license status with the Arizona Department of Revenue
- Update lease agreements to reflect the tax change
- Continue registering properties with your county assessor
- Maintain accurate records, especially for 2024 and earlier
- If you’re unsure, talk to a CPA or tax professional
Final Thoughts
This legislative update is a welcome relief for thousands of Arizona landlords — especially those managing just one or two properties. By cutting red tape and reducing costs, the state is making long-term rentals more accessible and sustainable — for both property owners and tenants.
Whether you’re a retiree renting out your winter home, a young investor managing your first unit, or a family hoping to keep monthly rent affordable, this change is worth celebrating.
About the Author
Justin Quen is a licensed CPA and proud Scottsdale native. He holds a Master’s degree in Accounting from the University of Arizona and runs a tax and accounting firm focused on personalized service for individuals and small business owners. Justin is passionate about helping Arizonans make smart financial decisions and understand the laws that affect their bottom line.
Questions about rental taxes or compliance? Reach out to Justin at justin@jqcpa.net for expert, local guidance.
