Are you still showing a “rental tax” line on Phoenix leases or rent invoices for 2025? With Arizona’s repeal of municipal rental TPT, that charge must come off for long-term residential rentals. If you own or manage rentals in Phoenix, you want to stay compliant, avoid disputes, and clean up your accounting. This guide breaks down what changed, who is affected, and the exact updates to make now. Let’s dive in.
What changed and when
- Arizona enacted SB 1131, which prohibits cities from taxing long-term residential rentals from and after December 31, 2024. Read the enacted law.
- The Arizona Department of Revenue (ADOR) instructed landlords to stop collecting residential rental TPT for periods beginning January 1, 2025. See ADOR’s guidance.
- ADOR canceled TPT licenses that only had the residential rental business code 045 effective December 31, 2024, though you still must file for pre-2025 periods.
Who is affected, and who is not
Long-term residential rentals
- Applies to rentals for residential purposes of 30 or more consecutive days. Cities can no longer levy TPT on this activity. See the statute at A.R.S. § 42-6004(H).
Short-term rentals remain taxable
- Stays under 30 days are still taxed under transient lodging classifications. Phoenix also requires a short-term rental permit. Review Phoenix’s STR registry requirements and keep your state TPT license current.
Commercial rentals still taxable
- The repeal does not cover commercial rental activity. Confirm your property use and classification before changing any tax settings. See A.R.S. § 42-6004.
Immediate actions to take
- Confirm your ADOR account status on AZTaxes.gov. If your license only had code 045, it should be canceled as of 12/31/2024. File any remaining returns for periods through that date. Review ADOR’s instructions.
- Stop collecting rental TPT on long-term units for billing periods starting 1/1/2025. Test upcoming cycles to confirm the tax line is gone.
- Keep transient lodging tax collection in place for short-term rentals. The repeal does not apply to stays under 30 days.
Update leases, invoices, and tenant notices
- Remove or revise any lease clauses that pass through a “city rental tax” for long-term rentals. If a signed lease still shows a tax pass-through, do not collect it going forward. Consider consulting an Arizona-licensed attorney before changing signed terms.
- Update rent statements and recurring invoice templates to remove the municipal rental tax line for periods beginning 1/1/2025.
- Send a short, dated notice to residents explaining the change, the effective date, and how their statement will look. Keep copies of all notices.
Fix your accounting and software
- Remove tax-calculation rules for business code 045 on rent line items in your property management system.
- Update rent rolls, recurring charges, and auto-billing so no municipal rental TPT posts for 2025 and later.
- If you use marketplaces for short-term rentals, verify marketplace facilitator and transient lodging settings remain correct.
Keep records to reduce risk
- SB 1131 adds a tenant protection: you must stop charging the repealed tax, and in any civil dispute you carry the burden to prove a current charge is not attributable to the old rental tax. See SB 1131.
- Maintain reconciliations showing amounts collected and remitted before 1/1/2025 and keep proof that invoices changed starting January 2025. Save ADOR account messages and cancellation notices. ADOR guidance.
Licensing and filings
- If your TPT license included other taxable activities, ADOR closed only the residential rental location, not the entire license. Verify each location in AZTaxes.gov and avoid canceling taxable activities by mistake. ADOR’s guidance explains the mechanics.
- File final returns and remit liabilities for pre-2025 periods. ADOR can audit prior periods if filings are missing or incorrect.
Watch Phoenix tax changes in 2025
- Phoenix approved a 0.5 percent increase to many city TPT and use tax rates effective July 1, 2025. This does not restore residential rental TPT, but it may affect other taxable activities. See the city’s notice on rate changes beginning July 1.
Investor angle: underwriting and pro formas
- For long-term residential units, remove any municipal rental TPT pass-through from 2025-forward pro formas and rent ledgers.
- Keep transient lodging taxes in place for short-term activity. Separate these in your models to avoid compliance issues.
- Maintain an audit file that documents the January 2025 transition. Clear records support due diligence, reduce dispute risk, and help future buyers verify compliance.
Quick checklist
- Confirm ADOR license cancellations or location closures for code 045.
- File and remit for periods through 12/31/2024.
- Stop collecting residential rental TPT as of 1/1/2025.
- Update leases, invoices, and software templates.
- Send a dated notice to residents and keep proof.
- Maintain reconciliations and documentation showing the tax removal.
- Keep STR permits and transient lodging filings current in Phoenix.
- Monitor city TPT changes that affect other activities starting 7/1/2025.
Ready to pressure-test your portfolio’s compliance or underwriting in Greater Phoenix? Connect with the investor-focused team at GRACE CRE for aligned guidance and local execution.
FAQs
When did Phoenix landlords have to stop charging rental TPT on long-term units?
- ADOR directed landlords to stop collecting for periods beginning January 1, 2025, following the statutory prohibition from and after December 31, 2024. See ADOR’s guidance.
Are short-term rentals in Phoenix still taxed after the repeal?
- Yes. Stays of fewer than 30 consecutive days remain taxable under transient lodging rules, and Phoenix requires a short-term rental permit. Review the STR registry requirements.
Do landlords have to refund taxes collected before 2025?
- The law requires you to stop charging the tax going forward but does not create an automatic refund for amounts lawfully collected and remitted before repeal. Disputes may be handled through civil claims. See SB 1131.
What if my TPT license covers other taxable activities besides residential rentals?
- ADOR indicates only the residential rental location was closed where other activities exist. Verify in AZTaxes.gov and keep other taxable locations active. See ADOR’s guidance.
Does the July 1, 2025 Phoenix rate change affect residential rental TPT?
- No. Residential rental TPT is prohibited by state law. The city’s 0.5 percent increase applies to other taxable classes. See Phoenix’s rate change notice.
