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Arizona taxes for delivery and rideshare drivers (2026)
Arizona is one of the friendliest states for a driver: a flat 2.5% rate, a standard deduction near the federal one, a state subtraction that mirrors the federal tips deduction, and an estimated tax rule that does not apply until your Arizona gross income passes $75,000. The details that surprise people are the two-year income test and the retroactive tips law.
This guide leans on the Arizona Revised Statutes, which set the rules, and we cite the sections so you can read them yourself. The 1099 gig tax calculator pre-fills a rounded Arizona rate; for a more precise figure, apply the standard deduction and tips subtraction as in the example below.
Key numbers
| Item | What applies |
|---|---|
| Income tax rate | Flat 2.5% (since tax year 2023) |
| Standard deduction (single) | $15,750 for 2025, adjusted yearly like the federal one |
| Federal tips deduction | Followed: subtraction under A.R.S. 43-1022(31), tax years after 2024 |
| Estimated tax required if | Arizona gross income over $75,000 (joint: $150,000) this year and last year |
| Estimated tax penalty | None if the tax due on the return is under $1,000 |
| Due dates | April 15, June 15, September 15, January 15 |
| Local income tax | None found |
Flat rate, wide deduction
Arizona starts with Arizona gross income, which the Senate staff describe as equivalent to the taxpayer's federal adjusted gross income, applies additions and subtractions to reach Arizona adjusted gross income, then subtracts the standard or itemized deductions. Since tax year 2023 the rate on taxable income has been a flat 2.5%, put in place by Senate Bill 1828. A.R.S. 43-1041 sets the single-filer standard deduction at $15,750, indexed to inflation as the federal one is.
The example: a single driver grosses $49,000 including $5,600 of tips, drives 6,600 miles in the first half of 2026 and 7,000 in the second, and has $1,050 of other expenses. The engine gives net profit $37,845.00 and AGI $35,171.34. Arizona subtracts $15,750 for the standard deduction and $5,600 for the tips subtraction, leaving taxable income of $13,821.34. Tax at 2.5% is $345.53, an effective rate of just 0.98% of AGI.
- Federal income tax: $1,077.71 after the $5,600 tips deduction
- Self-employment tax: $5,347.33
- Arizona tax: $345.53
- Total: $6,770.57, a set-aside of 13.8% of gross, or $1,692.64 a quarter
The self-employment tax is the real weight here: Arizona's $345.53 is only 6% of the $5,347.33 self-employment tax.
The tips subtraction is state law, and it is new
A.R.S. 43-1022, paragraph 31, allows a subtraction "for taxable years beginning from and after December 31, 2024" of qualified tips deducted under section 224 of the Internal Revenue Code, to the extent not already excluded. Paragraph 32 does the same for overtime. Because it points to the federal deduction, the federal conditions come with it: a work-valid Social Security number, no married-filing-separately, the $25,000 cap, and for 2026 the requirement that tips be reported to you on a 1099. For the driver above the subtraction is worth $140.00 of Arizona tax, a small number that is real money in a year with a low rate.
How it arrived matters if you filed a 2025 return early. News reports and the Governor's office described the 2026 tax package (HB 4168, signed in June 2026) as applying to the 2025 tax year, and a 2025 executive order had already directed the Department of Revenue to add the federal deductions to the 2025 Form 140. If you filed 2025 without the subtraction, ask the Department or a preparer whether to amend. The details for 2025 are secondary-source information; the statute above is what matters going forward. The tips deduction guide explains the federal side.
Estimated payments: the two-year income test
A.R.S. 43-581 is unusual. It requires estimated payments only from an individual whose Arizona gross income exceeds $75,000 for the year ($150,000 on a joint return) and who also had Arizona gross income above that amount in the preceding year. Four installments are due on the federal dates. Payments plus withholding should total at least 90% of this year's tax or 100% of last year's. And the statute adds that no penalty is assessed if the tax due on your return, after withholding and credits, is under $1,000.
For the example profile, Arizona gross income reaches $75,000 only at roughly $91,856 of gross receipts, which is net profit of about $80,701. At that level the Arizona tax would be about $1,341.25, and you would need installments only if it also held in the previous year. Most drivers are far below it, so for them the Arizona bill arrives with the return, and the federal estimates are what matter; see the quarterly payment guide and the quarterly estimated tax calculator. If you want to pay Arizona in installments voluntarily, the statute allows it, using Form 140ES.
A caution on the federal side: Arizona's threshold does not reduce federal obligations. A driver with a $1,200 federal bill and no Arizona estimate requirement still has to meet the federal safe-harbor rules to avoid a federal penalty.
1099s and cities
We found no Arizona rule setting a lower reporting threshold for 1099-K or 1099-NEC forms, so the federal thresholds apply: $20,000 and 200 transactions for a 1099-K and $2,000 for a 1099-NEC in 2026. Read the 1099 thresholds guide and report all income. Arizona cities do not levy income taxes on individuals as far as we found, but cities do require business licenses in some cases.
General information for tax year 2026, not tax advice. Recheck the Department of Revenue's 2026 Form 140 instructions when they are posted, because Arizona's deductions are indexed each year.
For contrast, the California guide covers a graduated-rate state with no state tips deduction, and the Texas guide covers a state with no income tax.
Frequently asked questions
Does Arizona allow the tips deduction?
Yes. A.R.S. 43-1022, paragraph 31, subtracts from Arizona gross income, for taxable years beginning after December 31, 2024, the amount of qualified tips received during the year that is deducted under section 224 of the Internal Revenue Code, to the extent not already excluded. It follows the federal deduction, so the federal conditions, including the 2026 information-reporting rule, apply. It was added by the 2026 tax bill (HB 4168), which applies to 2025 returns as well.
What is the Arizona income tax rate for 2026?
A flat 2.5% of taxable income. Senate Bill 1828 replaced the graduated brackets with a 2.5% flat rate starting with tax year 2023. A 2025 bill (HB 2918) proposed 2.47% for 2026, but we found no enacted reduction, and the Department of Revenue's 2026 estimated tax worksheet shows 2.5%.
What is the Arizona standard deduction?
A.R.S. 43-1041 sets $15,750 for a single filer, $23,625 for head of household, and $31,500 for a married couple filing jointly, and adjusts those amounts for inflation the same way the federal standard deduction is adjusted. The Department had not confirmed a 2026 figure when we checked, so the example on this page uses the 2025 amounts.
Do I have to make Arizona estimated payments?
Only if your Arizona gross income, which starts from federal AGI, exceeds $75,000 ($150,000 on a joint return) this year and also exceeded that in the prior year (A.R.S. 43-581). Even then no penalty is assessed if the tax due on your return is under $1,000 after withholding and credits. Many drivers fall below the income threshold and simply pay the Arizona tax with the return.
When are Arizona estimated payments due?
The statute says four installments on the due dates established by the Internal Revenue Code: April 15, June 15, September 15, and January 15. Total payments plus withholding should reach 90% of this year's tax or 100% of last year's. Form 140ES is the Arizona form.
Does Arizona tax gig income at the city level?
We found no Arizona local income tax on individuals. Check your city for business license rules, which are separate from income tax.
Sources
- Arizona Revised Statutes, 43-1022 (subtractions from Arizona gross income, paragraphs 31 and 32: qualified tips and overtime); 43-1041 (standard deduction); 43-581 (estimated tax, $75,000 test, $1,000 penalty exception)
- Arizona State Senate, Fact sheet for S.B. 1828 (flat 2.5% from 2023) and Fact sheet for H.B. 2918 (proposed 2.47%; Arizona gross income equivalent to federal AGI)
- Arizona Department of Revenue, Individual estimated tax payments and the 2026 Form 140ES booklet
- Forvis Mazars, Arizona updates IRC conformity date to January 1, 2026 (secondary source on HB 4168 and the retroactive tips subtraction)
- IRS, What the "No Tax on Tips" deduction means for you; federal figures from our methodology page