Why There’s No Estate Tax in Arizona

If you’ve heard that there’s no estate tax in Arizona, you heard right. Arizona doesn’t levy a state estate tax (a tax on an estate before it’s distributed) or a state inheritance tax (a tax on heirs). Families here plan around federal rules only. 

A Quick History of Estate Tax in Arizona

So why is there no estate tax in Arizona today? For decades, many states—Arizona included—used a “pick-up” tax. It didn’t add to a family’s total bill. Instead, it let a state “pick up” part of the federal estate tax via a dollar-for-dollar federal credit. When Congress passed the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) in 2001, that federal credit was phased out between 2002 and 2005—effectively collapsing state pick-up systems like Arizona’s. 

Some states “decoupled” from EGTRRA to keep collecting estate taxes. Arizona didn’t. In fact, after the federal credit went to zero in 2005, Arizona went further and repealed its obsolete pick-up tax in 2006. Since then, there’s been no separate Arizona estate tax on the books. 

Today’s Rules (and What Still Matters)

Because there’s no state-level estate tax in Arizona, your planning focus is federal. For 2025, the federal estate tax exemption is $13.99 million per person (effectively double for married couples with portability). Estates above the exemption can face a top federal rate of 40%. 

Also good to know: even though Arizona has no estate or inheritance tax, ordinary income tax still applies to income you receive after someone’s death. If you inherit a traditional IRA and take distributions, or if you inherit income-producing assets that keep throwing off income, that income can be taxable to you in Arizona. The absence of an estate or inheritance tax doesn’t change that. 

Why Arizona Chose This Path

Three practical reasons explain the current landscape:

Federal mechanics changed. When EGTRRA phased out the federal credit, states had to pass new laws to keep an estate tax. Arizona chose not to. Instead, lawmakers let the pick-up system expire, then formally repealed it. 

Competitiveness. Retirees and business owners weigh state tax burdens. No estate or inheritance tax keeps the state competitive with the many other states that also rely solely on federal rules. 

Simplicity. A single federal framework is easier for most families and practitioners than navigating layered state rules and thresholds.

What No Estate Tax in Arizona Means For You

If you’re planning in the Grand Canyon State, “estate tax in Arizona” means tracking federal law, not a separate state levy. High-net-worth households still benefit from core strategies—like using both spouses’ exemptions, credit shelter and portability planning, lifetime gifts, and charitable techniques—because those operate under federal rules that apply regardless of your state. 

Everyone else should still build a sound plan: a revocable trust to avoid probate and organize assets, updated beneficiary designations, powers of attorney, and a will. And remember the income-tax angle for inherited retirement accounts or ongoing trust income, since that can affect cash flow even when there’s no estate tax bill. 

(Learn More: Read about revocable trusts in Arizona versus Nevada.)