Arizona has no state estate tax. It has no inheritance tax and no gift tax. The only estate tax that could apply to Arizona residents is the federal estate tax. It has its own cutoff. For most families, this means no estate tax at all. Here is what you need to know.
Arizona's Tax Position
Arizona stopped collecting its estate tax for deaths after 2004 and formally repealed the tax in 2006. It has not brought it back. There is no separate inheritance tax in Arizona either. Some states tax the person who receives an inheritance. Arizona does not.
This applies to out-of-state heirs too. If someone in another state inherits from an Arizona resident, Arizona will not tax them. But if the heir lives in a state with its own inheritance tax, that state may tax what they receive. Each state sets its own rules on this. It is worth checking if your heirs live in other states.
Federal Estate Tax Exemption
The federal estate tax is the one that matters for high-value estates. In 2026, the federal cutoff is $15 million per person. That is $30 million for married couples. Estates below that level pay no federal estate tax. For estates above the cutoff, rates start at 18% and go up to 40%.
Congress raised the cutoff through the Tax Cuts and Jobs Act of 2017, and a 2025 federal tax law made the higher exemption permanent. Starting in 2026 the exemption is $15 million per person, and it is set to rise with inflation in future years. The steep drop that was once scheduled for 2026 will not happen, but Congress can always change the law again, so planning ahead is still the smart move.
Capital Gains Tax and Inherited Property
Even without an estate or inheritance tax in Arizona, there are still tax issues when property changes hands. The most common is capital gains tax. This is the tax you pay on the profit when you sell an asset.
When someone inherits real estate or other assets that have grown in value, they get a stepped-up basis. That means the value resets to fair market value at the date of death. The heir only pays capital gains tax on any increase after that date. This reset can save heirs a lot of money compared to what the original owner would have owed.
Arizona residents also pay state income tax. Inherited retirement accounts like IRAs and 401(k)s are subject to income tax when money is taken out. These are not estate taxes, but they are real costs that families should plan for. Knowing about these taxes in advance helps avoid surprises down the road.
Planning Around Federal Taxes
For families with estates near the federal cutoff, planning ahead makes a real difference. Options may include trusts, gifting plans, and proper beneficiary choices on retirement accounts and life insurance. The attorneys we work with can help Arizona families see where they stand and what steps make sense for their situation.
For a closer look at how estate planning lowers tax exposure, read our guide on trusts vs. wills. No Arizona estate tax. No Arizona inheritance tax. Just federal rules to plan around. That is the whole picture.
For the full Arizona walkthrough of federal estate, gift, and GST tax planning, including portability, the lifetime exemption, and annual exclusion gifts, read our pillar guide: Estate, Gift & GST Tax in Arizona: The Complete Guide.
What If My Heirs Live in Another State?
A common question is whether an inheritance gets taxed when the person receiving it lives in a state that has its own inheritance tax. For an inheritance passing from an Arizona estate, what matters is Arizona law and federal law, not where the heir happens to live. Arizona has no inheritance tax, and there is no federal tax on an inheritance until the estate is over the federal exemption, which is $15 million per person in 2026.
The few states that still impose an inheritance tax generally base it on where the person who died lived or owned property, not on where the heir lives. So an inheritance from an Arizona estate is generally not taxed simply because a beneficiary lives in another state. One thing to watch is income tax: if an heir inherits a pre-tax account like a traditional IRA, the withdrawals are taxable income to them in their own state, but that is income tax on the distributions, not a tax on the inheritance itself.