ARIZONA RESIDENTIAL RENTAL INCOME TRANSACTION PRIVILEGE TAX (TPT) RATES BY CITY
The State of Arizona and Counties levy Transaction Privilege Tax (TPT) -- Transient Lodging TAX on Hotel and Motel occupancy/stays less than 30 days. There is no State of Arizona or County Transaction Privilege Taxes (TPT) a.k.a. Arizona Sales Tax levied on stays/occupancy of 30 days or longer.
However, Arizona Municipalities have taxing authority to levy TPT on stays of 30 days or more - and many do so. Below are current metro Phoenix TPT tax rate rental property owners will pay to local municipalities in the Phoenix East Valley on residential rental earned income.
ALERT - Short Term residential rental stays of less than 30 days require the landlord to pay the same Transaction Privilege Tax (TPT) -- Transient Lodging TAX at the same Rate as Motel and Hotel businesses are required to pay. Motel and Hotel stays of 30 days or more are exempt from paying the higher TPT Transient Lodging TAX. Contact Arizona Department of Revenue for applicable tax rate information and/or go to https://www.azdor.gov for complete details.
WHO PAYS TRANSACTION PRIVILEGE TAX (TPT) ON RESIDENTIAL INCOME
Phoenix investors who are a lessor/owner of the Arizona residential rental property are required to pay TPT when the rental property is within the city limits of a municipality that levies TPT.
If the Phoenix real estate investor has not hired a property manager to manage their property and collect and remit TPT, then the lessor/owner must apply for a TPT license and pay the annual license fees to be able to administer TPT payments they owe on rental income earned.
For more information and complete details about Transaction Privilege Tax owed for residential rental income earned, visit Arizona Department of Revenue website.
In a weak Phoenix rental market where there are more residential rental properties for rent than renters, the rent charged would probably include the transaction privilege tax (TPT) the Phoenix investor lessor/owner is required to pay.
In a stronger rental market, like the rental market we are experiencing now, it is typical for the total monthly rent to be quoted with an additional administrative fee that includes the TPT and cost of the property manager to collect and pay TPT on behalf of the lessor/owner.
Good luck finding a Phoenix rental property without the lessor/owner/property manager charging the tenant the TPT separately from the quoted rent. Just chalk it up to the cost of renting and snap up the home you want to rent before someone else gets it.
TRANSACTION PRIVILEGE TAX (TPT) RATES FOR LEASE TERMS GREATER THAN 30 DAYS
CITY OF CHANDLER, ARIZONA – 1.5% of the gross rent for each Chandler residential rental property
TOWN OF GILBERT, ARIZONA – 1.5% of the gross rent for each Gilbert residential rental property
CITY OF MESA, ARIZONA – 1.75% of the gross rent for each Mesa residential rental property
CITY OF TEMPE, ARIZONA – 1.8% of the gross rent for each Tempe residential rental property
CITY OF PHOENIX, ARIZONA – 2.3% of the gross rent for each Phoenix residential rental property
CITY OF SCOTTSDALE, ARIZONA – Scottsdale exempts up to two Scottsdale residential rental properties, providing the lessor/owner does not own rental properties elsewhere in Arizona. Lessor/owners that have a rental property in Scottsdale and have more than two rental properties in Arizona are subject to 1.65% TPT rate on all Scottsdale residential rental property income. If the lessor/owner has a commercial rental property anywhere in Arizona, all Scottsdale residential rental property income is subject to the 1.65% TPT.
This author is not a tax professional. Consult with a competent tax advisor. The purpose of this post is to notify rental property owners when they are required to pay TPT on rental income earned in the course of renting their investment property based upon the location of the property.
Arizona Associate Broker, CRS, GRI, e-PRO, SFR
Berkshire Hathaway HomeServices | Arizona Properties
Sam has 25+ years of full-time real estate experience assisting buyers and sellers transact Chandler, Gilbert, Mesa, Phoenix, Scottsdale, Tempe AZ homes for sale and investment property.
Contact Sam to discuss your Arizona home purchase plans and schedule an appointment to see how he can help make your plans become a reality.