Arizona income tax
- ASRS benefits and annuities received after Dec. 31, 1988, and contributions withdrawn after Dec. 31, 1974 (other than as benefits), are subject to Arizona income tax under Title 43. Contributions and ASRS account securities themselves are exempt from state, county and municipal income tax while held. A.R.S. 38-792(A)
- Up to $2,500 a year of benefits, annuities and pensions from ASRS (and other listed Arizona and federal public plans, combined) is subtracted from Arizona gross income. A.R.S. 43-1022(2)(b)
- Social Security benefits included in federal adjusted gross income are subtracted from Arizona gross income. A.R.S. 43-1022(10)
Contributions and protection
- Member contributions are picked up by the employer under IRC 414(h), so they are not taxed federally until paid out as a refund or benefit. A.R.S. 38-736(B)
- Benefits are not subject to execution or attachment and are nonassignable except as the article provides. A.R.S. 38-792(A)-(B)
What ASRS's own documents say
Very little. ASRS's publications that we have mention taxes in only two places. Your contributions for the pension and health insurance premium benefit come out of your pay before tax, while the long term disability part comes out after tax ASRS Fact Sheet (Dec. 2025); ASRS New Member Guide, p. 5; ASRS Session 4, p. 6; A.R.S. 38-736(A); A.R.S. 38-737. And if you take a partial lump sum paid to you directly at retirement, ASRS withholds federal and Arizona income tax from it unless you roll it over. Paid directly, ASRS withholds 20% of the taxable amount for federal tax and 5% of the gross for Arizona; it can be rolled over instead. ASRS Re-Retirement Application, p. 2 (Section 6); A.R.S. 38-760(B)(3), (3)(a)-(b) For anything else, the rules above come from the Arizona statutes alone.
From ASRS and the law
- ASRS pensions are subject to Arizona income tax, but up to $2,500 a year of public pension income (ASRS and other listed public plans combined) is subtracted from Arizona gross income.A.R.S. 38-792(A); A.R.S. 43-1022(2)(b)
- Arizona does not tax Social Security benefits: the taxable part on your federal return is subtracted on your Arizona return.A.R.S. 43-1022(10)
- Your ASRS contributions are taken out pre-tax (employer pick-up), so they are taxed when paid back to you as a pension or refund.A.R.S. 38-736(B)
- ASRS benefits can't be seized by creditors or assigned, except as the ASRS law allows (for example, domestic relations orders).A.R.S. 38-792(A); A.R.S. 38-773
Social Security coverage is on the Social Security page. A partial lump sum paid to you has federal and Arizona tax withheld (payment options), and a refund of pre-tax contributions is taxable when paid.
Questions
Does Arizona tax my ASRS pension?
Yes, but up to $2,500 a year of public pension income (ASRS and other listed public plans combined) is subtracted from Arizona gross income (A.R.S. 38-792(A); A.R.S. 43-1022(2)(b)).
Does Arizona tax Social Security?
No. The part taxed on your federal return is subtracted on your Arizona return (A.R.S. 43-1022(10)).
What about federal tax?
The ASRS law does not describe federal income tax on benefits, so we don't cover it here. Ask a tax professional or the IRS.
Source: ASRS Employer Basics 2025 handbook, March 2025 edition, saved Nov. 12, 2026; with other ASRS publications and the Arizona Revised Statutes. Also ASRS New Member Guide, p. 5. Also ASRS Fact Sheet. Also ASRS Basics for Employers, Session 4: Health Insurance Premium Benefit (slides), p. 6. Also ASRS Application for Re-Retirement Benefit, p. 2. Also A.R.S. 38-736, 38-737, 38-760, 38-773, 38-792 (Arizona Revised Statutes, Title 38, Ch. 5, Art. 2). Also A.R.S. 43-1022 (Arizona income tax subtractions). Last reviewed .