In Arizona residential rental is the renting of Arizona real property for more than 30 days for residential purposes only.
Arizona residential rental properties are subject to state rent tax. Some, but not all, Arizona cities also tax residential rental income.
Arizona transaction privilege tax is a tax on the privilege of doing business in Arizona. TPT applies when an owner of Arizona rental real estate is engaged in business under the residential rental classification by the Model City Tax Code.
If you rent Arizona residential real estate all payments made by the tenant or on behalf of the landlord are taxable. The following is a non-inclusive list of the types of payments from tenants that are taxable rental income:
- Non-refundable and forfeited deposits
- Late payment fees
- Pet fees
- Federal rent subsidies (HUD)
The following fees passed on to the tenant are also taxable rental income:
- Common area fees
- Maintenance charges
- Homeowner association fees
- Landscaper maintenance
- Property tax
- Pool Service
- Repairs and/or improvements
Individual owners of taxable rental properties are required by law to obtain a Transaction Privilege Tax (TPT) license with the Arizona Department of Revenue (ADOR), regardless if the owner rents the property themselves or employs a property management company (PMC). A city TPT license is only required if your residential real estate is in a city that imposes a tax on residential rental rent.
Starting with the January 2018 reporting period, PMCs will no longer be permitted to report and remit TPT using their own TPT license (formerly referred to as a “Master License”) on behalf of client property owners. All taxes are to be filed and remitted using the property owners’ license numbers.
- To participate in the new E-File Solution, PMCs will need to complete and submit the Property Management License Application.
Warning to Arizona Landlords that Have Property Managers Collecting Rent Tax
Starting with the January 2018 reporting period, property management companies will no longer be permitted to report and remit transaction privilege tax using their own TPT license on behalf of client property owners. All rent taxes must be filed and remitted using the property owner’s TPT licenses. To participate in the new E-Solution, property management companies must complete the Property Management License Application.
Every residential rental property owner is required to obtain an Arizona transaction privilege tax license from the Arizona Department of Revenue (ADOR) for each location where residential rental income is taxable.
For more information and resources on Arizona residential rentals, visit the following links: