Arizona ranks 15th overall on the 2025 State Tax Competitiveness Index, with an 8th-best individual income tax structure and a cost-of-living index near the national average. Retirement costs vary mainly by housing location. Tucson two-bedroom rentals are roughly $1,300, while Phoenix-area rentals often range from $1,550 to $1,900, with higher-demand neighborhoods reaching $2,000 or more. Homeownership can still require $700 to $1,000 monthly for insurance, HOA fees, utilities, and upkeep. Healthcare costs on Medicare with Plan G and Part D run about $4,800 to $6,000 per person annually. Utilities average $300 to $450 monthly, and budgets often include food, transportation, and recreation. Arizona has a 2.5% flat income tax and exempts Social Security from state tax, while sales tax rates are higher in many cities.
"Arizona uses a 2.5% flat income tax and exempts Social Security from state tax. The state's sales tax rank is a much worse 45th, and combined state and local rates in most cities sit between 8% and 9.5%. Federal income tax rates still apply to retirement income."
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