Arizona Estate Tax: Federal Rules and No State Tax

Most Arizona estates owe no estate tax at all. Two facts explain that. First, Arizona itself levies no state estate tax and no state inheritance tax, so the state takes nothing when someone dies. Second, the only estate-level tax that can reach an Arizona family is the federal estate tax, and the federal exclusion is high enough that the overwhelming majority of estates pass to heirs completely tax-free.

There is a third Arizona-specific piece that most guides skip: because Arizona is a community property state, at the first spouse's death only the decedent's one-half of the community property lands in the federal gross estate. The survivor already owns the other half. This guide leads with those two Arizona facts, then explains the federal rules that apply on top of them, including the exclusion, the portability election, when Form 706 is required, and how the estate tax differs from the step-up in basis.

Arizona Has No State Estate or Inheritance Tax

Start with the good news for Arizona families: the state imposes no estate tax and no inheritance tax.

The Arizona Department of Revenue confirms that Arizona repealed its estate tax and levies no inheritance or gift tax. Arizona's old estate tax was a "pickup" tax that equaled the federal credit for state death taxes and collected only what the federal government already allowed as a credit, so it cost estates nothing extra. When federal law phased out that credit, the Arizona tax became inoperative, and the state has no estate tax on decedents today.

An inheritance tax is a separate tax that some states levy on the people who receive an inheritance, based on their relationship to the decedent. Arizona has neither kind of state death tax. So for an Arizona estate the state-level analysis is simple: the state takes nothing, and only the federal estate tax can apply.

One caution: if you inherit property located in another state, or from someone who lived in a state that does levy an estate or inheritance tax, that state's rules can still apply to the property within its borders. Living in Arizona does not shield out-of-state property from another state's death tax.

Community Property and the Federal Gross Estate

This is the Arizona-specific point that changes the federal math for married couples, and it is easy to miss.

Arizona is a community property state under A.R.S. 25-211. Property that a married couple acquires with community funds during the marriage belongs to both spouses equally. When one spouse dies, the surviving spouse already owns an undivided one-half interest in that community property in their own right. Only the decedent's one-half share is included in the federal gross estate. The survivor's half was never the decedent's to pass, so it never enters the decedent's estate.

Contrast that with a common-law (separate property) state. There, whatever the decedent owned or held in title counts in full, and a jointly held asset is pulled into the estate except for the portion the survivor can show they contributed. For a couple whose wealth is mostly community property, the Arizona rule can cut the reported estate value roughly in half compared with a common-law state, which pushes the first spouse's taxable estate further below the exclusion.

Separate property, meaning property owned before marriage or received during marriage by gift or inheritance under A.R.S. 25-213, is fully included in the estate of the spouse who owns it. The community property split matters most for couples whose combined wealth approaches the federal exclusion, because halving the community share can keep the first spouse's taxable estate well under $15 million.

The same community property character produces a useful income-tax result at death. Under IRC Section 1014(b)(6), both halves of community property receive a stepped-up basis when the first spouse dies, not just the decedent's half. That "double step-up" is the tax rule that actually helps most Arizona families. The Arizona community property guide explains how title language works, and the Arizona step-up in basis guide walks through the double step-up fully.

The Federal Estate Tax: 2026 Exclusion

Once you set the state layer aside, the federal estate tax applies only to estates whose value exceeds the federal exclusion amount, the exemption threshold set by federal law.

For deaths in 2026, the federal exclusion is $15 million per person. That means:

• One person can pass up to $15 million free of federal estate tax.
• A married couple can shield up to $30 million using portability (covered below).
• Only the amount above the exclusion is taxed.
• The top federal estate tax rate is 40%.

The exclusion is indexed for inflation, so it rises in future years. Because the tax reaches only the amount over $15 million, the effective rate on an entire estate is always below 40%, and for the great majority of Arizona estates it is zero.

Many older estate planning documents warned that the exclusion would roughly cut in half at the start of 2026 under a sunset provision in the 2017 tax law. That sunset did not take effect. Under current federal law the exclusion is $15 million per person for 2026. If your plan includes trusts or gifting programs designed around a lower exclusion, review it with your attorney, because the strategy may no longer be needed and could even be counterproductive given the step-up in basis rules.

What Counts in the Gross Estate

The "gross estate" for federal purposes is broader than what passes through probate or is listed in a will. Under Internal Revenue Code Sections 2031 through 2046, it generally includes:

• Real estate, bank and brokerage accounts, stocks, and bonds
• Life insurance proceeds on a policy the decedent owned or controlled (ownership, not who the beneficiary is, drives inclusion)
• Retirement accounts such as IRAs, 401(k)s, and 403(b)s
• Business interests and closely held company stock
• The decedent's one-half of community property, plus the decedent's separate property in full
• The decedent's share of other jointly owned property
• Assets in a revocable living trust
• Certain gifts made within three years of death, particularly transfers of life insurance
• Powers of appointment the decedent held

Someone with a paid-off Arizona home, a large IRA, and a life insurance policy can have a gross estate far bigger than their probate estate, because most of those assets pass outside probate but still count for the estate tax. The gross estate is then reduced by debts, funeral and administration expenses, and deductions to reach the taxable estate.

Two deductions eliminate estate tax for most families, even wealthy ones. The unlimited marital deduction lets property left outright to a surviving spouse who is a U.S. citizen pass free of federal estate tax with no dollar limit, which is why most married couples owe nothing when the first spouse dies. The unlimited charitable deduction makes property left to a qualified charity fully deductible, dollar for dollar. Debts, funeral costs, and administration expenses also reduce the taxable estate.

When a Federal Return (Form 706) Is Required

File IRS Form 706, the United States Estate Tax Return, when any of these apply:

• The gross estate plus adjusted taxable gifts exceeds the exclusion (tax may be owed).
• You want to elect portability to preserve the deceased spouse's unused exclusion.
• The estate has generation-skipping transfers to allocate.

The return is due nine months after the date of death. Form 4768 grants an automatic six-month filing extension, but any tax owed is still due at the nine-month mark, since the extension covers filing, not payment. Form 706 is one of the more complex federal returns, so estates that must file it usually benefit from a CPA or estate attorney to document valuations, claim deductions, and elect portability correctly. Arizona requires no separate state estate tax return, because the state has no estate tax.

Portability for Married Arizona Couples

When the first spouse in a marriage dies, their unused federal exclusion does not vanish automatically. Under the portability election, the surviving spouse can claim the deceased spouse's unused exclusion, called the deceased spousal unused exclusion, or DSUE, and add it to their own.

Example. A husband dies in 2026 leaving a $4 million estate to his children. Because that transfer uses $4 million of his $15 million exclusion, his remaining $11 million ports to his wife. She then has her own $15 million exclusion plus his $11 million, a combined $26 million shielded from estate tax. If instead he had left everything to his wife, the unlimited marital deduction would use none of his exclusion, so the full $15 million would port to her.

Community property makes the portability math friendlier in Arizona. Because only the decedent's one-half of the community property counts in the first spouse's gross estate, the first estate often uses little of its exclusion, so more of the exclusion is available to port to the survivor. But portability is not automatic. The executor must file Form 706 to make the election, even when the estate owes no tax and is far below the exclusion. Many families skip the filing because "we do not owe anything," and that choice can cost the surviving spouse a great deal if the couple's combined estate later grows past one exclusion. Filing solely to preserve portability is a straightforward step an attorney can handle.

Practical Steps

Most Arizona estates need no estate tax planning at all. The exclusion is high, and Arizona adds no state layer. The practical moves are usually these:

1. Confirm you are under the exclusion. Add up everything, including life insurance you own and retirement accounts, not just probate assets. For a married couple, count only the decedent's one-half of the community property. If the total is well below $15 million, no federal estate tax applies.
2. Preserve portability for a married couple. If one spouse dies, consider filing Form 706 to lock in the unused exclusion, even when no tax is due. It is a low-cost safeguard.
3. Lean on the double step-up. Holding appreciated community property until death gives the surviving spouse a full step-up on both halves. Gifting those same assets during life hands the recipient your old basis and wastes the step-up.
4. Keep community property as community property. Converting community property to separate property or to plain joint tenancy can cost the survivor the double step-up. Confirm how appreciated assets are titled before making changes.
5. Get help only if the estate is genuinely large or complex. Business interests, out-of-state property, blended families, or an estate approaching the exclusion are the cases where an attorney and CPA earn their fee.

To estimate what settling an estate costs in your county, use our Arizona probate fee calculator, and see the Arizona probate costs guide for how the pieces add up.

Frequently Asked Questions

Does Arizona have an estate tax or inheritance tax?

No. Arizona has no state estate tax and no state inheritance tax. The Arizona Department of Revenue confirms the state repealed its estate tax and levies no inheritance or gift tax. The only estate-level tax an Arizona family can face is the federal estate tax, which reaches only estates above the federal exclusion.

How does community property change the Arizona estate tax picture?

Arizona is a community property state. When one spouse dies, the surviving spouse already owns half of the community property, so only the decedent's one-half share enters the federal gross estate. That can roughly halve the reported estate value for a married couple compared with a common-law state.

How much can I leave without owing federal estate tax?

For deaths in 2026, the federal exclusion is $15 million per person. A married couple can shield up to $30 million using portability. Only the amount above the exclusion is taxed, at a top rate of 40%.

Do I need to file a federal estate tax return in Arizona?

You must file IRS Form 706 if the gross estate plus lifetime taxable gifts exceeds the exclusion, or if you want to elect portability for a surviving spouse. It is due nine months after death, with a six-month filing extension available. Arizona requires no separate state estate tax return.

Related Guides

• Arizona Community Property After Death
• Arizona Step-Up in Basis
• Arizona Probate Costs
• Arizona Probate Fee Calculator
• Arizona Surviving Spouse Rights

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Sources

Sources:

• Title: Estate Tax Publication (Arizona repealed its estate tax; no inheritance or gift tax). Publisher: Arizona Department of Revenue. Access date: 2026-07-01. Publication Date: Not listed. URL: https://azdor.gov/sites/default/files/2023-03/PUBLICATION_2006_900.pdf
• Title: A.R.S. 25-211, Property acquired during marriage as community property. Publisher: Arizona Legislature. Access date: 2026-07-01. Publication Date: Not listed. URL: https://www.azleg.gov/ars/25/00211.htm
• Title: A.R.S. 25-213, Separate property. Publisher: Arizona Legislature. Access date: 2026-07-01. Publication Date: Not listed. URL: https://www.azleg.gov/ars/25/00213.htm
• Title: Estate Tax. Publisher: Internal Revenue Service. Publication Date: 2025. URL: https://www.irs.gov/businesses/small-businesses-self-employed/estate-tax
• Title: About Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return. Publisher: Internal Revenue Service. Publication Date: 2025. URL: https://www.irs.gov/forms-pubs/about-form-706
• Title: IRS Releases Tax Inflation Adjustments for Tax Year 2026. Publisher: Internal Revenue Service. Publication Date: 2025. URL: https://www.irs.gov/newsroom/irs-releases-tax-inflation-adjustments-for-tax-year-2026-including-amendments-from-the-one-big-beautiful-bill
• Title: IRC Section 1014, Basis of Property Acquired From a Decedent. Publisher: Legal Information Institute, Cornell Law School. Access date: 2026-07-01. Publication Date: Not listed. URL: https://www.law.cornell.edu/uscode/text/26/1014

Last Updated: July 2026. This guide provides general information about the federal estate tax as it applies to Arizona estates, and about Arizona's lack of a state estate or inheritance tax. Tax law is complex and changes frequently. Consult a tax professional or estate planning attorney for advice specific to your situation. It is not legal advice.