Arizona LLC Taxes — Step 8 of 8
Here's the final piece: your LLC is pass-through by default, and Arizona layers one of the simplest, lowest state tax systems in the country on top — a flat 2.5% rate with no separate brackets to think about. Let's break down exactly what you'll owe, with an estimator to run your own numbers.
By default, an Arizona LLC is pass-through — it pays no federal or state income tax itself; profits flow to your personal return, where you owe federal income tax + 15.3% self-employment tax + Arizona's flat 2.5% state income tax. There's no franchise tax and no separate entity-level tax to worry about. Arizona's 2.5% rate is the lowest flat rate among all US states that tax income.
- Default tax
- Pass-through
- Federal income tax
- Yes
- Self-employment
- 15.3%
- AZ state income tax
- Flat 2.5%
- Franchise tax
- None
- This step
- Final 🎉
- Overview
- All steps →
How an Arizona LLC Is Taxed
By default, the IRS doesn't tax an LLC as its own thing — it "passes through" the profits to the owners, who report them on their personal returns. How that works depends on how many members you have:
Treated as a "disregarded entity." You report business profit on Schedule C with your personal Form 1040.
Treated as a partnership. The LLC files Form 1065 and issues each member a Schedule K-1 for their share.
On your share of the profit, you'll owe three taxes total:
- Federal income tax — at your personal marginal rate, after the standard deduction and the 20% QBI deduction many LLC owners qualify for.
- Self-employment tax (15.3%) — covering Social Security and Medicare on your active business earnings (half is deductible).
- Arizona state income tax — a flat 2.5% on your taxable income, regardless of how much you earn. No brackets, no tiers.
Arizona LLC Federal + State Tax Estimator
Enter your expected annual net profit and filing status for a rough estimate. Since Arizona uses one flat rate, the state math is simple — the complexity is all on the federal side:
Simplified 2026 estimate using the federal standard deduction, a simplified 20% QBI deduction, self-employment tax (half deductible), and Arizona's flat 2.5% rate applied after the standard deduction. Ignores credits, dependents, other income, and TPT. For planning only — not tax advice. Confirm with a CPA.
Could an S-Corp Election Save You Money?
Once your LLC earns a healthy profit, electing S-corporation tax status can lower your self-employment tax. As an S-corp, you pay yourself a reasonable salary (subject to payroll taxes) and take the rest as distributions, which aren't subject to the 15.3% self-employment tax. This works the same way in Arizona as anywhere else — Arizona's flat state rate applies either way and doesn't change the S-corp math itself.
- File Form 2553 with the IRS to elect S-corp status (the S-corp election — not Form 8832, which is for C-corp treatment).
- Generally worth considering once net profit is consistently around $60,000–$80,000+, where SE-tax savings outweigh the added payroll and admin cost.
- Run the numbers with a CPA — payroll, reasonable-salary rules, and extra filings mean it isn't automatically a win for everyone.
Don't forget your TPT and any city taxesThe estimator above covers income taxes only. If your business sells taxable goods or services, you're also collecting and remitting Arizona's Transaction Privilege Tax (see Step 7) — that's a separate obligation from your personal income tax return, calculated on gross receipts rather than net profit.
- ✓Forms your Arizona LLC for $39 + the $50 state fee
- ✓Maricopa County address — skip publication entirely
- ✓Can obtain your EIN — even without an SSN
- ✓No upsells · No data selling · Privacy by Default
Disclosure: LLC School may earn a commission via this link, at no cost to you. See our advertising disclosure.
From naming your LLC to understanding your taxes, you now know exactly how to start and run an Arizona LLC — including its most distinctive quirk, the publication requirement. The last move is the easiest: file it. Compare the top formation services, or go straight to our #1 pick.
Arizona LLC Taxes — FAQ
Ahmad Adil is the founder and CEO of LLC School. The tax guidance here — pass-through treatment by default, federal income and self-employment tax, Arizona's flat 2.5% state rate, and the separate TPT obligation — reflects current IRS and Arizona Department of Revenue rules. This is educational information, not tax advice; consult a CPA for your situation.
About Ahmad Adil → Arizona LLC Overview →