Arizona LLC Taxes: The Complete Filing Guide (2025)

Arizona LLC Tax Basics

Navigating your Arizona LLC tax obligations doesn’t have to be complicated. We’ll walk you through the essentials of pass-through taxation, explain Arizona’s specific requirements, and highlight strategies to stay compliant and organized. This guide covers everything from federal income taxes to city-specific requirements and filing deadlines.

Use the links below to jump directly to the section you need:

• Arizona LLC Taxes at a Glance
• Understanding LLC Taxation Basics
• Federal Tax Obligations
• Arizona State Taxes
• Local Tax Considerations
• Tax Calendar and Filing Tips
• Tax Strategies for Arizona LLCs
• Forms and Resources

Arizona LLC Taxes at a Glance

Understanding LLC Taxation Basics

How Arizona LLCs Are Taxed By Default

Your Arizona LLC doesn’t pay taxes itself. Instead, profits flow through to you and your members, who report them on their personal tax returns. This is called pass-through taxation.

Here’s how it works:

1. Your LLC earns income from business activities
2. The LLC itself files no tax return (unless you elect otherwise)
3. Profits “pass through” to members based on their ownership percentage
4. Each member reports their share on their personal tax return
5. Members pay tax at their individual income tax rates

What this means for you: Unlike corporations, your business profits are only taxed once — which typically saves you money.

Tax Classification Options

While pass-through taxation is the default, your Arizona LLC can choose from two alternative tax treatments.

Default LLC Tax Status:

• Single-member LLC: Taxed as a sole proprietorship
• Multi-member LLC: Taxed as a partnership

Optional Tax Classifications:

• S Corporation: This can help reduce self-employment taxes by paying “reasonable salaries” to your business’s owners
• C Corporation: With this option, the LLC pays corporate tax on profits while members pay personal tax on their distributions (creating double taxation)

Not sure which tax classification is right for your business? Schedule a free consultation with 1-800Accountant.

Federal Tax Obligations

Income Tax

As a Arizona LLC owner, you’ll report your share of business profits on your personal tax return using:

• Form 1040 + Schedule C (single-member LLCs)
• Form 1040 + Schedule E + Schedule K-1 (multi-member LLCs)

Federal income tax rates range from 10% to 37% based on your tax bracket (actual brackets will depend on inflation adjustments and any tax law changes).

Simply Put: Whatever money your business makes (after expenses) gets added to your personal tax return — just like income from a job.

Self-Employment Tax

LLC members actively involved in the business must pay self-employment tax of 15.3% (covering Social Security and Medicare) on their share of LLC profits.

Key points:

• Applies to net earnings of $400 or more
• Calculated on Schedule SE
• You can deduct 50% of the self-employment tax as an “above-the-line” deduction, which lowers your adjusted gross income

What happens if I miss this payment? The Internal Revenue Service (IRS) charges penalties of 0.5% per month plus interest. However, first-time mistakes can often qualify for penalty abatement if you have a clean compliance history.

Employment Taxes

If your LLC has employees, you must:

• Withhold federal income tax
• Pay and withhold FICA taxes (7.65% each for employer and employee)
• Pay federal unemployment tax (FUTA)
• File quarterly employment tax returns (Form 941)
• Provide Forms W-2 annually

Estimated completion time: 2-3 hours per quarter (significantly less with payroll software or professional help)

Estimated Tax Payments

Because no tax is withheld from your LLC profits, you’ll likely need to make quarterly estimated tax payments using Form 1040-ES. These payments cover both income and self-employment taxes on your share of the business income. Missing deadlines or underpaying can lead to IRS penalties — even if you pay in full later.

Working with an accountant can help ensure accurate calculations, on-time payments, and a smarter overall tax strategy.

Key deadlines:

• April 15
• June 16
• September 15
• January 15

Pro Tip: Set calendar reminders 15 days before each deadline. This gives you time to prepare without the last-minute rush that leads to mistakes.

Arizona State Taxes

Arizona Income Tax

Arizona has a flat personal income tax rate of 2.5% that applies to your LLC’s profits on your personal return.

Filing requirements:

• Use Arizona Form 140
• Due April 15, 2025

Bottom Line: For every $1,000 your LLC earns, expect to pay about $25 in Arizona state income tax (in addition to federal taxes).

Arizona Small Business Income Tax 

Arizona offers small business owners an alternative flat 2.5% tax rate on small business gross income, known as Small Business Income (SBI) tax, rather than claiming this income on their individual income tax return. 

Filing Requirements: 

• Use Arizona Form 140-SBI and file alongside your individual tax return (Form 140) 
• Due April 15, 2025

Arizona Corporate Income Tax 

If your LLC elects to be taxed as a C corp, you’ll be required to pay a flat tax rate of 4.9% on taxable income generated from business activity within Arizona. 

Filing Requirements: 

• Use Arizona Form 120
• Due April, 15 2025

Transaction Privilege Tax 

Arizona doesn’t impose a sales tax. Instead, vendors must pay a Transaction Privilege Tax (TPT). The general statewide rate is 5.6%, but this can increase up to 11.2% based on your LLC’s industry and location.

If your Arizona LLC sells physical products or certain services: 

• Register using Form JT-1 with the Arizona Department of Revenue (ADOR) (filing fee is $1-$50) 
• Submit Form TPT-2 
• Due monthly

Note: By submitting an Arizona Joint Tax Application (Form JT-1) your business will be registered for TPT and payroll taxes listed below. 

Payroll Taxes 

If you have employees in Arizona, you’ll be responsible for two types of payroll taxes. 

Unemployment Insurance (UI) Tax 

• Use Form JT-1 to register your business (if you haven’t already)
• Rate for new employers is 2% for a minimum of two years
• Use Form UC-018
• Due quarterly 

Withholding Tax 

• Use Form JT-1 to register your business (if you haven’t already) 
• Each employee must submit Form A-4
• Rate starts at 2%, but varies by employee  
• Due annually or quarterly via AZTaxes portal

Local Tax Considerations

City Transaction Privilege Taxes

In addition to the TPT imposed by the state, a number of counties and cities impose their own additional TPT rate. 

Cities with income taxes include:

• Phoenix (2.8%)
• Sedona (3%) 
• Tempe (1.8%) 
• Tucson (2.6%)
• List of other Arizona cities

Filing requirements:

• Obtain a TPT license from the city in which your business is located 
• Identify your area’s tax rate using the ADOR Tax Rate Look-Up Tool
• Generally due monthly 

Property Taxes

If your LLC owns real property in Arizona:

• Rates vary by locality and assessed value 
• Classified and valued in each county by the County Assessor
• May qualify for various exemptions based on business type

Tax Calendar and Filing Tips

Key Deadlines for Arizona LLCs

January:

• January 15: Final estimated tax payment for previous year
• January 31: Issue Forms W-2/Forms 1099 to employees/contractors
• January 31: Fourth quarter payroll tax payment due (federal and state) 

April:

• April 15: State income tax returns due (personal, small business, or corporate)
• April 15: Federal income and self-employment tax returns due
• April 15: First quarter estimated tax payment due 
• April 30: First quarter payroll tax payment due (federal and state) 

May: 

June: 

• June 16: Second quarter estimated tax due 

July: 

• July 31: Second quarter payroll tax payment due (federal and state) 

September:

• September 15:  Third quarter estimated tax payment due

October:

• October 31: Third quarter payroll tax payment due (federal and state) 

Record-Keeping Checklist

Keep these records for at least seven years:

• Business income records (invoices, receipts)
• Expense receipts and documentation
• Bank and credit card statements
• Asset purchase and improvement records
• Vehicle mileage logs
• Home office documentation
• Payroll records
• Previous tax returns

Tax Strategies for Arizona LLCs

S Corporation Election Benefits

Converting your LLC to an S corp for tax purposes can save you money on self-employment taxes:

1. File Form 2553 with the IRS
2. Pay yourself a “reasonable salary” subject to employment taxes
3. Take any remaining profits as distributions exempt from self-employment tax

Example: An LLC making $100,000 in profit pays 15.3% self-employment tax on the entire amount. As an S Corp, if $60,000 is a reasonable salary and $40,000 is taken as distributions, only the $60,000 is subject to employment taxes.

Potential Savings: In this example, you’d save about $6,120 in self-employment taxes.

Business Expense Deductions

Common deductions Arizona LLC owners often overlook include:

• Home office deductions
• Business mileage (70¢ per mile for 2025)
• Health insurance premiums
• Retirement plan contributions
• Professional development expenses
• Business meals (50% deductible)

Forms and Resources

Federal Tax Forms

• Schedule C: Profit or Loss From Business (sole proprietors)
• Form 1065: U.S. Return of Partnership Income
• Schedule K-1: Partner’s Share of Income, Deductions, Credits
• Form 1120-S: U.S. Income Tax Return for an S Corporation
• Form 2553: Election by a Small Business Corporation (S corp)
• Form 8832: Entity Classification Election

Arizona Tax Forms

• Form 140: Arizona Resident Personal Income Tax Return
• Form 140-SBI: Arizona Small Business Income Tax Return 
• Form 120: Arizona Corporate Income Tax Return 
• Form UC-018: Arizona Unemployment Tax and Wage Report 
• Form TPT-2: Arizona Transaction Privilege, Use and Severance Tax Return

Helpful Resources

• Internal Revenue Service
• Arizona Department of Revenue
• AZTaxes