Arizona’s Legislature previously passed a bill to ban rental tax that took effect this year. Here’s how to take action if you are still being charged.
As of Jan. 1, Arizona landlords should not be charging rental tax. But if it’s still showing up on your bill, here’s some information about what you can do.
A 30-day notice is typically required for changes in tax rates, and renters should have been notified of the tax change several weeks before the law’s effective date last month.
If your lease starts on or after Jan. 1, 2025, the lease agreement should not include any references to the rental tax. If your lease started before then, your rent should have decreased by the amount previously charged as tax.
Any other rental charges that had a tax associated with them should no longer include the tax, such as a $5 late fee that is $5.09 with tax—the late fee should now just be $5.
The change in rental tax charge does not apply to commercial properties, healthcare facilities, or motels, hotels, and short-term rentals booked for fewer than 30 days.
This change relies on landlords passing these savings on to residents—but landlords are not always honest. According to a lawsuit filed by Arizona Attorney General Kris Mayes, roughly 10% of Arizona renters have been the victims of price gouging at the hands of property management companies.
RELATED: We mapped out all 400 apartment complexes accused of rent price-fixing in Arizona
Mayes is now investigating complaints that some landlords are still charging rental tax, despite a law banning them from doing so.
Landlords and rental companies should also not be collecting the absence of a rental tax through other means such as junk fees or rent add-ons without modifying a lease, which requires consent from all parties to the agreement, according to the Arizona Department of Real Estate.
If you don’t see your rent go down, check previous bills, because you may not have been charged rental tax in the first place—some landlords absorbed the cost instead of passing it on to renters.
If you were charged before and are still being charged, you can submit a consumer complaint through Mayes’ office here.
If you are a low-income renter, you can find legal counsel through Community Legal Services, a nonprofit law firm committed to increasing fairness in the civil justice system.
Why is rent no longer taxed?
Democratic Gov. Katie Hobbs signed a bill pushed by Republicans in the state Legislature in 2023 that prohibits cities from charging rental taxes, with the effective date delayed to help towns and cities adjust to the loss in tax income.
The League of Arizona Cities and Towns, which lobbies on behalf of municipalities across Arizona, was one of the largest voices of opposition to the legislation—warning that the loss in tax income would force localities to raise taxes elsewhere or remove essential services.
What’s the catch?
In 2025, Arizona cities and towns are predicted to lose an estimated $230 million in tax revenue from the loss of rental tax.
While renters do get to keep some money in their pockets, housing experts have said that this change alone won’t lead to significant decline in rental costs.
Rental tax rates are set by the 75 municipalities across the state that collect it, and they vary from 1.5% to 3.5%. The average rate is 2.5%,
For a monthly rent of $1,500—the average rent in the Valley, according to RentCafe—the new law would result in about $38 in savings.
Before this new law was implemented, 16 out of 91 cities and towns in Arizona already did not charge a rental tax, including Flagstaff, Sedona, Tucson, Oro Valley, Payson, and Lake Havasu City.
