Estate planning involves considering not only how your assets will be distributed but also how taxes could affect your legacy. Some states impose estate or inheritance taxes that reduce the value of an estate before it reaches beneficiaries.
Here’s the $10,000 question for people living in our state: Is there an Arizona estate tax? Let’s look at the lay of the land for folks who reside in The Grand Canyon State.
No State-Level Estate or Inheritance Tax
Arizona does not impose a state estate tax. This means that when someone passes away, their assets are not subject to additional taxation at the state level.
Inheritance tax is another concern in some states. This tax applies to beneficiaries who receive assets from an estate.
Unlike estate taxes, which are paid by the estate before distributions, inheritance taxes are paid by those who inherit. Arizona does not impose an inheritance tax, regardless of the value of the estate or the relationship between the decedent and the beneficiary.
Out-of-State Estate and Inheritance Tax Exposure
Although there is no Arizona estate tax, an Arizona resident’s estate could still be subject to one in another state. If someone owns real estate or tangible property in a state that imposes an estate tax, that state may tax the portion of the estate located within its jurisdiction.
This could create a significant tax burden if the property is in a state with a low estate tax exemption.
Inheritance tax exposure is another consideration. If an Arizona resident inherits property in a state that imposes an inheritance tax, they may be required to pay a tax on their inheritance.
The tax rate and exemption amounts vary by state and can depend on the relationship between the beneficiary and the deceased. Understanding these rules helps avoid unexpected tax liabilities.
Federal Estate Tax Considerations
While Arizona does not tax estates, the federal government does impose an estate tax on estates that exceed a certain threshold.
In 2025, the federal estate tax exclusion is $13.99 million per individual. This means that an estate must be worth more than this amount before any estate tax is owed.
A married couple can shield $27.98 million by using both spouses’ exclusions. If an estate exceeds the exclusion amount, the portion above the limit is subject to a tax rate of up to 40 percent.
Annual Gift Tax Exclusion
Gifting during life can reduce the size of an estate, but large gifts count against the federal estate tax exemption.
The good news is that there is an additional annual gift tax exclusion. You can use it to give a certain amount to an unlimited number of gift recipients annually without cutting into your multimillion-dollar exemption.
In 2025, the annual gift tax exclusion is $19,000. To be clear, you can give this amount to any number of people tax free within the same calendar year.
Future Estate Tax Changes
Current estate tax laws provide a high exclusion amount, but this is set to change. The Tax Cuts and Jobs Act of 2017 temporarily raised the federal estate tax exemption, but this provision will expire at the end of 2025.
Unless Congress acts, the exemption will revert to pre-2018 levels, which would lower the exclusion to approximately $6 million per individual, adjusted for inflation.
For those with substantial assets, planning ahead is important. Making gifts or funding certain types of trusts before the exemption decreases can help minimize estate tax exposure.
Arizona residents with large estates should review their plans to ensure they take full advantage of current tax laws.
Check Out Our On-Demand Webinars!
We have recorded seven webinars that you can access at your convenience. They cover all of the most important topics, and you can visit this page to gain access: Phoenix, AZ estate planning webinars.
- Are Handwritten Wills Legal in Arizona? - October 8, 2026
- Do All AZ Estates Go Through the Full Probate Process? - October 1, 2026
- New Arizona Transplant? Schedule an Estate Plan Review - September 24, 2026
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