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As of January 1 2025, Arizona renters are seeing something new on their monthly rent bills… or rather, something missing. The residential rental tax that was previously charged on long-term rentals is gone.
The Arizona Legislature approved a rental tax ban that ended the Transaction Privilege Tax (TPT) on residential rental properties. The new law officially took effect at the start of 2025, reshaping how landlords, property owners, and residential tenants handle rent, lease agreements, and other fees.
From major cities like Phoenix and Tucson to Queen Creek and Apache Junction, this law aims to reduce housing costs, simplify compliance, and offer some relief for Arizona renters struggling with financial strain.
Let us learn more about how this law affects both renters and landlords across Arizona cities through this blog. Keep reading.
Key Highlights
- Arizona ended the city transaction privilege tax on long-term rentals in early 2025.
- Renters now save roughly $30 to $50 a month on monthly rent, depending on tax rates in their cities and towns.
- Landlords typically pass the rental tax on to tenants, so removing it reduces the extra cost of renting.
- Short-term rentals, hotels, and health care facilities remain subject to the TPT tax.
- Ultimate Properties helps property owners update lease agreements, manage other fees, and stay compliant under the new law.
What Changed and Why Landlords Should Pay Attention
The Transaction Privilege Tax, Arizona’s version of a sales tax, used to apply to residential rental income in many cities and towns. Local rates often ranged from 1% to 3% of monthly rent.
Landlords typically passed that cost directly to tenants. For example, someone renting a $1,500 apartment in Queen Creek or Apache Junction might have paid $30 to $45 more each month just in rental tax.
According to the Arizona Department of Revenue, the city transaction privilege tax no longer applies to long-term rentals, which means any lease lasting 30 days or more is now exempt.
Governor Katie Hobbs signed the bill to help renters save and make rental management easier for property owners. The move followed years of complaints about rising rental costs and the added financial strain on Arizona renters.
How It Helps Renters
The biggest benefit for residents is saving money. A 2.5% rental tax on a $1,500 apartment equals about $38 per month, or roughly $460 a year.
This additional income can go toward health care facilities, public school tuition, groceries, or avoiding late fees. Even though Arizona renters now see savings, the ongoing housing shortage and rising rental costs in major cities may still drive higher monthly rent.
Tenants should double-check their lease agreements to ensure the TPT tax was removed. Lease terms created before 2025 may still reference the previously charged residential rental tax.
What Landlords Need to Know
For Arizona property owners, this rental tax ban reduces administrative work. They no longer collect or remit transaction privilege tax TPT for long-term rentals.
Key steps for landlords include:
- Removing rental tax from lease agreements and rent invoices.
- Filing final 2024 TPT tax returns with the state department or Arizona Department of Revenue.
- Updating records with the county assessor.
- Staying compliant with construction permits, property tax credit, and other fees.
If a property owner also operates short-term rentals, the tax still applies. The Transaction Privilege Tax (TPT) remains in place for stays under 30 days, including vacation rentals, hotels, and health care facilities that provide lodging.
Who Still Pays: Exceptions and Edge Cases
Not every property in Arizona is exempt from the Transaction Privilege Tax. While the new law removed the rental tax for most long-term residential leases, certain property types and lease situations still fall under TPT rules.
Here are some key exceptions to know:
- Short-term rentals: Any lease or stay lasting fewer than 30 days, such as vacation rentals or Airbnb listings, remains subject to TPT.
- Commercial properties: Office buildings, retail spaces, and warehouses continue to be taxed under separate TPT categories for business operations.
- Health care facilities: Properties that provide lodging as part of medical or assisted living services may be taxed differently, depending on their state registration.
If you’re unsure whether your property qualifies for the TPT exemption, it’s best to verify directly with the Arizona Department of Revenue or your county assessor’s office. They can confirm eligibility and guide documentation requirements.
Understanding these exceptions helps landlords avoid compliance issues and ensures that tax reporting aligns with state and local regulations.
Staying Compliant and Informed
Now that the rental tax ban is active, communication between landlords and residential tenants matters more than ever. The law simplified payments, but it also created new responsibilities for both Arizona property owners and renters.
Arizona renters should carefully review their monthly rent statements and lease agreements to make sure the transaction privilege tax (TPT) or any previously charged residential rental tax has been removed. If the charge still appears, they should contact their landlords for clarification.
Landlords, on the other hand, should send a formal notice confirming that the TPT tax has been removed and clearly explaining any other fees that may still apply, such as maintenance, late fees, or costs related to construction permits. Transparent community communications help prevent misunderstandings and keep everyone confident in the process.
To stay compliant and organized:
- Update all lease terms and lease agreements to reflect the removal of residential rental tax.
- Provide written confirmation of any changes to tenants.
- Verify records with the Arizona Department of Revenue and the county assessor to ensure filings are accurate.
- Check payment systems or accounting software for old TPT tax settings that may need adjustment.
- Review cities and towns' requirements, since some local fees may still apply even without the transaction privilege tax TPT.
- Keep digital copies of all rent statements, lease agreements, notices, and correspondence for at least one year.
- Stay informed through official state department updates or property management newsletters to catch any rule adjustments or clarifications.
Clear documentation helps avoid disputes and keeps both landlords and residential tenants aligned with Arizona’s new law. By keeping records up to date, everyone can save money, reduce extra costs, and maintain smooth management of rental properties, long term rentals, and short-term rentals across Arizona cities.
What’s the Role of Property Management Companies
With the rental tax ban now in place, property management companies play a bigger role in helping landlords stay compliant. The rule change affects lease agreements, rent collections, and how taxes are reported to the Arizona Department of Revenue.
A professional management team can:
- Review and update lease terms to remove the rental tax line item.
- Communicate changes clearly to residential tenants and handle questions about rent adjustments.
- Make sure properties are registered with the county assessor and meet all city and state department requirements.
- Track other fees, late payments, and financial records to avoid errors.
- Help property owners navigate new regulations that apply to short-term rentals or commercial properties.
For landlords with multiple rental properties across different Arizona cities, working with an experienced property management company can prevent costly mistakes and ensure every lease stays current under the new law.
Partnering with Ultimate Properties makes compliance easier. Our team understands Arizona’s new rental tax rules and helps landlords update leases, manage communication, and stay organized under the new law.
Questions About Arizona’s Rental Tax Ban
1. Does the rental tax ban apply to lease renewals signed before 2025?
If a lease was signed before 2025 and still lists a rental tax, landlords must remove it when the agreement renews. The tax exemption applies to all active long-term leases from 2025 onward, even if the original lease began earlier.
2. Can cities add new local fees to replace lost rental tax revenue?
Some cities and towns are exploring service fees or adjustments to other local taxes to offset the loss. Any new charges must go through public hearings or be approved by the Arizona Legislature before taking effect.
3. How can landlords confirm they’re following the correct tax rules?
They can check official guidance from the Arizona Department of Revenue or consult property management experts like Ultimate Properties, who stay updated on local compliance requirements.
A New Chapter for Renters, Landlords, and Cities
The ban on TPT for long-term rentals has already reshaped Arizona’s residential rental landscape. Arizona renters enjoy a bit more room in their monthly rent budgets, and landlords and property owners have fewer tax filings and other fees to manage. At the same time, cities and towns are rethinking how to maintain public safety, community communications, and essential services despite lost revenue.
It’s a major law and policy shift that highlights the balance between affordability, housing costs, and sustainability in Arizona’s rental market. For now, residents can enjoy the extra savings each month and look forward to a simpler lease agreement and rental process for long term rentals in 2025 and beyond.
If you need expert help managing these changes, connect with Ultimate Properties to keep your rentals compliant and running smoothly.
