Arizona Capital Gains Tax (2026)
Arizona capital gains tax rate: Taxed as ordinary income at 2.5% flat
Arizona taxes capital gains as regular income at the flat 2.5% rate — no special long-term rate. This is lower than most states that tax cap gains as income.
Federal Capital Gains Rates Still Apply to Arizona Residents
All Arizona residents also owe federal capital gains tax. Federal long-term capital gains rates are 0% (income up to ~$47,025 single), 15% (income up to ~$518,900 single), or 20% (above). High earners may also owe the 3.8% Net Investment Income Tax (NIIT).
Short-Term vs. Long-Term Capital Gains in Arizona
Assets held less than one year are taxed as ordinary income at federal rates (10%–37%). Assets held over one year qualify for the preferential 0%/15%/20% federal rates. Arizona taxes capital gains as regular income at the flat 2.5% rate — no special long-term rate. This is lower than most states that tax cap gains as income.
Planning Considerations for Arizona Investors
- Tax-loss harvesting can offset gains at both state and federal levels
- Timing asset sales to control income year and bracket placement
- Arizona taxes capital gains at Taxed as ordinary income at 2.5% flat — factor this into net-of-tax return calculations
- Qualified Opportunity Zone investments can defer federal and potentially state gains
Frequently Asked Questions
What is the capital gains tax rate in Arizona?
Arizona taxes capital gains as regular income at the flat 2.5% rate — no special long-term rate. This is lower than most states that tax cap gains as income. Federal rates (0%, 15%, 20% for long-term gains) also apply regardless of state.
Does Arizona have a different rate for long-term vs. short-term capital gains?
Arizona does not distinguish between short- and long-term capital gains — both are taxed as ordinary income at up to 2.5% flat. Only federal law provides preferential long-term capital gains rates.
How do I reduce capital gains tax in Arizona?
Strategies include: holding assets over one year for federal long-term rates, tax-loss harvesting to offset gains, contributing to retirement accounts (401k, IRA), investing in Qualified Opportunity Zones, and timing sales across tax years. In Arizona, capital gains are taxed at up to Taxed as ordinary income at 2.5% flat, so these strategies reduce both federal and state tax.
Is this capital gains tax calculator free for Arizona?
Yes. Enter your gain amount, holding period, and annual income. The calculator applies both federal rates (0%/15%/20% long-term) and Arizona's Taxed as ordinary income at 2.5% flat state rate to estimate your total tax owed.