Educational information only, not tax advice. Rules and figures change — confirm your situation with a qualified Arizona tax professional before filing.
Arizona · USA · Short-term rental taxes
Short-Term Rental Taxes in Arizona
Arizona STR income is subject to state Transaction Privilege Tax (TPT) at 7.27%, plus city TPT and any local transient lodging tax (TLT), and must also be reported as ordinary income on your federal and Arizona state income tax returns.
The 30-Second Answer
- Transaction Privilege Tax (TPT): Rentals under 30 days are taxable sales under Arizona's TPT. You must obtain a TPT license from AZTaxes.gov and report income using business code 025 (state/county) and business code 044 (city).
- Online Lodging Marketplaces (OLMs): If you book through Airbnb or Vrbo, the platform collects and remits TPT on your behalf — but you must still file a TPT-2 return each period (even a $0 return) and deduct that income using deduction code 775.
- Local Transient Lodging Tax (TLT): Many Arizona cities add a TLT on top of the base TPT — for example, Mesa charges an additional 5.0% TLT (business code 144) — bringing combined rates to 14%+ in some cities.
- Federal & Arizona income tax: Net STR profit is reported on Schedule E (or Schedule C if you provide substantial services) of your federal return and carried to your Arizona Form 140 state return; Arizona conforms to federal IRC deductions.
Deductions
What Arizona STR Hosts Can Deduct
Arizona conforms to the federal Internal Revenue Code, so expenses deductible on Schedule E federally are generally deductible on your Arizona state return too.
If you use the property personally for more than 14 days or 10% of rental days (whichever is greater), the IRS mixed-use rules apply and deductions must be pro-rated. Arizona follows the same federal approach. This is educational information, not tax advice.
Filing Calendar
Key Dates & Filing Calendar
Arizona TPT returns are filed monthly, quarterly, or annually depending on your license type; income tax returns follow the standard April deadline.
Even if you had zero rental activity in a period, you must still file a $0 TPT-2 return or your license may be flagged. Cancel your TPT license promptly when you stop renting.
Arizona Department of Revenue – Short-Term Lodging (azdor.gov, 2024)
Tax Treatment
Schedule E vs. Schedule C: Which Applies to Your Arizona STR?
Most Arizona STR hosts report on Schedule E (passive rental income), but hosts who provide hotel-like services may need Schedule C (self-employment income).
Schedule E – Rental Income
Standard rental reporting for most STR hosts
- Net rental income taxed at your ordinary federal income tax rate; no self-employment tax
- Passive activity loss rules may limit deductions if you have other income
- Arizona Form 140 picks up the federal Schedule E figures automatically
- Depreciation, mortgage interest, repairs, and management fees all deductible
No income ceiling
Schedule C – Business Income
Required if you provide substantial services to guests
- Net profit subject to both income tax AND self-employment tax (~15.3% on first $168,600 in 2024)
- Allows deduction of the employer-equivalent half of SE tax
- Qualified Business Income (QBI) deduction of up to 20% may apply
- Arizona Form 140 picks up Schedule C net profit as ordinary income
No income ceiling
Depreciation
Depreciation for Arizona STR Properties
The IRS allows you to recover the cost of your rental property over time through depreciation; Arizona conforms to these federal rules.
| Asset | Typical write-off period | Notes |
|---|---|---|
| Residential rental building | 27.5 years (straight-line) | Land value is not depreciable; only the structure and improvements |
| Appliances, furniture & fixtures | 5 years | May qualify for bonus depreciation or Section 179 expensing in the year placed in service |
| Carpeting & flooring | 5 years | Treated as personal property if easily removed; otherwise 27.5 years as structural component |
| Roof, HVAC, major improvements | 27.5 years | Structural improvements are depreciated over the remaining life of the building |
Arizona conforms to the federal IRC depreciation rules (MACRS). Bonus depreciation percentages change year to year under federal law — consult a tax professional for the current-year rate.
When you sell an Arizona STR property, the IRS recaptures depreciation previously claimed at up to 25% (unrecaptured Section 1250 gain). Arizona taxes capital gains as ordinary income at the state level.
Transaction Privilege Tax & Transient Lodging Tax
Arizona STR Local Tax Rates
Every Arizona STR is subject to state TPT plus the city's TPT and any additional Transient Lodging Tax (TLT). Rates vary by city — Mesa is shown as an example.
Short-term rentals (under 30 days) are taxed under Arizona's Transaction Privilege Tax system. The state rate is 7.27%; cities add their own rates on top. Some cities also levy a separate Transient Lodging Tax (TLT) using business code 144.
14.27% combined (Mesa example)
City of Mesa – Transient Lodging Tax page (mesaaz.gov, 2024); Arizona Department of Revenue – Short-Term Lodging (azdor.gov, 2024)
| Booking type | Who collects & remits | What it means for your books |
|---|---|---|
| Booked directly by host | Host collects TPT/TLT from guest and remits via TPT-2 on AZTaxes.gov | Record gross receipts; remit TPT/TLT separately; deduct TPT paid as a business expense |
| Booked via Airbnb or Vrbo (OLM) | Online Lodging Marketplace collects and remits state/city TPT on host's behalf | Report full OLM income on TPT-2 then deduct 100% using deduction code 775; host still files $0 return each period |
Rates differ across Arizona cities. Always verify the current rate for your specific city with the Arizona Department of Revenue's Tax Rate Table at azdor.gov before filing.
Platforms
How Airbnb & Vrbo Handle Arizona STR Taxes
Arizona has designated major booking platforms as Online Lodging Marketplaces (OLMs) responsible for collecting and remitting TPT — but hosts must still file returns.
| Platform | Reports your income | Collects the local lodging tax | Annual earnings summary |
|---|---|---|---|
| Airbnb | Issues 1099-K if earnings exceed IRS threshold ($5,000 for 2024) | Yes — collects & remits Arizona state and city TPT as an OLM | Annual earnings summary available in host dashboard |
| Vrbo / HomeAway | Issues 1099-K if earnings exceed IRS threshold | Yes — collects & remits Arizona state and city TPT as an OLM | Annual earnings summary available in host dashboard |
| Direct bookings | Host responsible for own records; no platform 1099-K | No — host must collect TPT/TLT from guest and remit directly | Host must maintain own records |
Using Multiple Platforms?
If you use both an OLM (Airbnb/Vrbo) and take direct bookings, you must file a single TPT-2 return that reports all income. OLM income is reported then fully deducted using deduction code 775; direct-booking income is reported and taxed normally. Keep platform earnings summaries separate to avoid double-counting.
IRS 1099-K Reporting (U.S. Rule)
The IRS 1099-K threshold was $5,000 for tax year 2024, dropping to $2,500 for 2025 and $600 thereafter under the American Rescue Plan Act phase-in. Arizona does not have a separate state 1099-K threshold — federal rules govern. Platforms report to the IRS; you must report all rental income regardless of whether you receive a 1099-K.
Arizona Department of Revenue – Short-Term Lodging / OLM rules (azdor.gov, 2024); IRS – Tips on Rental Real Estate Income (irs.gov, 2024)
Illustrative P&L: Schedule E vs. Schedule C
Example Arizona STR with $40,000 gross rental revenue and $18,000 in expenses. For illustration only — not tax advice.
Record-Keeping
Stay Audit-Ready as an Arizona STR Host
Arizona TPT audits and IRS Schedule E audits both require solid documentation — keep these records organized.
| Keep | How long | Why |
|---|---|---|
| TPT-2 returns and payment confirmations | 4 years from filing date | Arizona statute of limitations for TPT assessments is generally 4 years |
| Platform earnings summaries (Airbnb, Vrbo) and 1099-Ks | 7 years | Reconcile against TPT returns and Schedule E; IRS can audit up to 6 years if income understated by 25%+ |
| Receipts for all deductible expenses (repairs, cleaning, management, utilities) | 7 years | Required to substantiate Schedule E deductions in an IRS or Arizona audit |
| Depreciation schedules and property purchase documents | Permanently (or 7 years after sale) | Needed to calculate depreciation recapture on sale and prove cost basis |
| TPT license and any city business license documents | Duration of rental activity + 4 years | Arizona requires TPT license number on all STR advertising; proof of compliance |
Arizona law requires your TPT license number to appear on all advertising for your short-term rental. Keep a copy of your license confirmation from AZTaxes.gov readily accessible.
Estimator
Short-Term Rental Tax Estimator
Plug in your bookings and costs to see your likely taxable position.
Your Numbers
Total short-term-rental income, before costs.
Allowable running costs, mortgage interest, depreciation and platform fees.
Your top income-tax band, as a percentage.
Estimated tax owed
Income tax on your net rental profit at your marginal rate.
Illustrative estimate. A simplified model to orient you — it is not tax advice. Confirm your situation with a qualified local professional.
Sources & notes
This page is for educational purposes only and does not constitute tax, legal, or financial advice. Tax rates and rules change — always verify current figures with the Arizona Department of Revenue (azdor.gov) and a qualified tax professional.
- Arizona Department of Revenue – Short-Term Lodging — azdor.gov/business/transaction-privilege-tax/short-term-lodging — primary source for TPT rules, business codes, OLM deduction code 775, and license requirements (2024)
- City of Mesa – Transient Lodging Tax — mesaaz.gov/Business-Development/Transaction-Privilege-TPT-Tax/Transient-Lodging-Tax — Mesa TPT and TLT rates (2.0% + 5.0% + 7.27% state = 14.27% total) and business codes 44/144 (2024)
- Arizona Revised Statutes § 42-5070 — azleg.gov — statutory basis for TPT on short-term lodging rentals under 30 days
- IRS – Tips on Rental Real Estate Income, Deductions and Recordkeeping — irs.gov/businesses/small-businesses-self-employed/tips-on-rental-real-estate-income-deductions-and-recordkeeping — federal Schedule E rules, depreciation, and recordkeeping (2024)
- Stessa – Arizona Rental Property Tax Deductions — stessa.com/blog/rizona-rental-property-tax-deductions/ — Arizona IRC conformity, TPT elimination on long-term residential rentals effective Jan 1 2025 (2025)
- Womble Bond Dickinson – Arizona Residential Rental Tax Changes 2025 — womblebonddickinson.com — TPT elimination on long-term residential rentals effective January 1, 2025 (2025)
Questions
Frequently Asked Questions: Arizona STR Taxes
Mr Props Team
Property & Short-Term Rental Tax specialists
Make Tax Season a Non-Event
Mr. Props tracks your STR income, expenses and remittances all year, so your Arizona filing is ready to file instead of reconstructed in a panic.
Join Hosts Running Smarter Portfolios
Monthly tactics on STR tax, pricing and operations — written for operators, not accountants.
No spam. Unsubscribe anytime.