Phoenix real estate bookkeeping has to serve two tax systems at once. Federal rules drive depreciation, passive losses and exchanges, while Arizona adds a flat 2.5 percent income tax, transaction privilege tax (TPT) on short-term lodging and commercial leases, and a Maricopa County property tax that depends on how each parcel is classified. Long-term residential rentals no longer carry city rental tax, which changed how many Phoenix landlords set up their books in 2025.
This guide explains what Phoenix real estate bookkeeping needs to capture in 2026 for each of those Arizona items, with a worked property tax example and a short federal checklist. The aim is a ledger that feeds every Arizona and federal filing from the same records without rework.
For an investor or property manager in the Phoenix area, the monthly bookkeeping work falls into a few recurring jobs:
Our real estate investor bookkeeping checklist sets out the general monthly and year-end routine. The sections below cover what is specific to Arizona and Maricopa County.
Arizona taxes individual income at a single rate. The statute now in force provides that the tax is 2.5% of taxable income, replacing the older graduated brackets. Arizona residents pay it on all taxable income, and nonresidents pay it on income from Arizona sources, which includes rent from a Phoenix property.
A flat rate makes the Arizona cost of rental profit easy to estimate. Each $40,000 of net rental income that flows into Arizona taxable income adds $1,000 of Arizona tax. Owners who live in another state still file an Arizona nonresident return for their Phoenix rentals, and their home state may also tax the same income and give a credit for the Arizona tax.
For the books, the flat rate changes little in the day-to-day coding. It matters most at year end, when the bookkeeper supplies net rental income by property and the depreciation detail described further down, so the preparer can carry federal figures into the Arizona return and apply Arizona's adjustments.
Until the end of 2024, many Arizona cities charged TPT on residential rent, and landlords collected it from tenants and filed returns. Under A.R.S. 42-6004(H), from and after December 31, 2024, a city, town or other taxing jurisdiction may not levy a transaction privilege, sales, gross receipts, use, franchise or other similar tax on renting or leasing real property for residential purposes. The same subsection states that the ban does not apply to hotel, motel or other transient lodging businesses.
At the state level, residential rentals were already outside TPT. The commercial lease classification covers real property used by the lessee for commercial purposes and expressly excludes leases or rentals of real property used for residential or agricultural purposes.
Bookkeeping steps for a long-term Phoenix landlord after the change:
This page covers only the ledger side of the change. Our Arizona landlord tax rules for 2026 cover the rental tax ban in full, including how it affects lease language and tenant charges.
Short-term rentals sit in the transient lodging classification. Arizona law defines a "transient" as a person who obtains lodging on a daily or weekly basis, or on any other basis for less than thirty consecutive days. A Phoenix condo rented through a booking platform for weekend stays is taxable lodging, while the same condo on a 12-month lease is a residential rental with no TPT.
The statute also lets an operator exclude income from online lodging transactions when the operator has documentation from a registered online lodging marketplace that the marketplace has remitted or will remit the tax. For bookkeeping, that means each booking channel should run through its own income account:
| Booking channel | What the books record | TPT treatment |
|---|---|---|
| Registered marketplace that remits tax | Gross booking revenue, platform fees, net payout | Keep the marketplace's remittance documentation; the operator excludes those transactions |
| Direct bookings (own website, repeat guests) | Gross rent, cleaning fees, deposits | Operator reports and pays TPT on these receipts |
| Stays of 30 or more consecutive days | Rent under the stay agreement | Outside the transient definition; treated as residential rental |
Mixing these channels in one income account is a frequent reason a short-term host cannot reconcile TPT returns at year end. Our vacation rental bookkeeping guide shows how to split revenue by platform and by fee type. Commercial landlords with retail or office tenants in Phoenix still report TPT under the commercial lease classification, and our guide to Arizona transaction privilege tax explains licensing, rates and filing frequency.
Arizona property tax runs on a legal class for each parcel. The class sets an assessment ratio, and the ratio applied to the limited property value produces the assessed value that tax rates are charged against. For Phoenix investors, three classes matter most:
| Legal class | Typical Phoenix property | Assessment ratio for tax year 2026 |
|---|---|---|
| Class 1 (commercial) | Retail, office and industrial buildings | 15.5 percent, falling to 15 percent from 2027 |
| Class 3 | Home occupied by the owner as a primary residence | 10 percent |
| Class 4 | Residential rentals, including short-term rentals not occupied by the owner | 10 percent |
The commercial ratio comes from the schedule in A.R.S. 42-15001, which sets fifteen and one-half percent beginning from and after December 31, 2025 through December 31, 2026 and fifteen percent after that. Class 3 and class 4 are both assessed at 10 percent of full cash value or limited valuation. Class 4 includes residential property that is solely leased or rented, and residential property leased or rented to lodgers unless the owner lives there as a primary residence.
Two compliance points connect directly to the books. Arizona requires every owner of residential rental property to keep its contact details, the parcel number and the year the building was built on file with the county assessor, and an owner who lives outside Arizona must also name an in-state statutory agent. Separately, the assessor reviews class 3 parcels, and a home that is rented out while still classified as a primary residence can be reclassified to class 4 if the owner does not respond to the assessor's notices.
The Arizona Constitution limits how fast taxable value can grow. Since tax year 2015, the value used for property taxes under Article IX, Section 18 is generally the lesser of the full cash value of the property or an amount five percent greater than the value for the prior year. Market value can rise much faster than the limited value, so the bookkeeper should record both figures from each notice.
The figures below are illustrative. The $9.00 per $100 of assessed value is a round rate chosen for the arithmetic; actual combined rates vary by taxing district. The example also assumes no new construction or change in use, since the assessor recalculates limited value under a different method after those events.
| Item | Phoenix rental house (class 4) | Small retail building (class 1) |
|---|---|---|
| 2025 limited property value | $280,000 | $280,000 |
| 2026 full cash value | $335,000 | $335,000 |
| 2026 limited value (lesser of FCV or prior year plus 5%) | $294,000 | $294,000 |
| Assessment ratio | 10% | 15.5% |
| Assessed value | $29,400 | $45,570 |
| Tax at an illustrative $9.00 per $100 | $2,646 | $4,101.30 |
At the same limited value, the 2027 drop in the commercial ratio to 15 percent would lower the retail building's assessed value to $44,100 and the illustrative tax to $3,969. Maricopa County bills arrive in two halves: the first half is due October 1 and becomes delinquent after November 1, and the second half is due March 1 and becomes delinquent after May 1. Recording each half when it is paid, or when the lender pays it from escrow, keeps the property tax expense on the right property and in the right year.
Federal law now allows a permanent 100% additional first year depreciation deduction for eligible depreciable property acquired after Jan. 19, 2025, under the One Big Beautiful Bill Act. Rental buildings themselves are depreciated over 27.5 years and fall outside the bonus rules. Appliances, carpeting, land improvements and other shorter-life components can qualify.
Arizona follows the federal result through two steps. For taxable years beginning after December 31, 2025, Arizona defines the Internal Revenue Code as the code in effect on January 1, 2026, and for 2025 it includes the provisions of Public Law 119-21 that apply retroactively to that year. Arizona then adds back the federal depreciation deduction and subtracts depreciation computed as if the additional allowance had been the full amount allowed under section 168(k). For property placed in service in taxable years after 2016, the subtraction equals the federal bonus amount, so a Phoenix investor's Arizona depreciation generally matches the federal figure.
The exception is the new special allowance for qualified production property under section 168(n). For taxable years beginning after December 31, 2025, Arizona requires that amount to be added back, so a manufacturing building would need a separate Arizona depreciation schedule. Rental investors rarely own such property, but developers and owner-users should flag it.
As a simple illustration, if a cost segregation study on a Phoenix rental identifies $60,000 of five-year and fifteen-year components placed in service in 2026, the federal return can deduct the full $60,000 and Arizona allows the same deduction, worth $1,500 of Arizona tax at the 2.5 percent rate. Our summary of Notice 2026-11 and the bonus depreciation transition rules explains which assets qualify and how the acquisition date is tested.
The Arizona return starts from federal figures, so federal accuracy carries straight through. The items to keep current all year:
For tools, many Phoenix landlords run their ledgers in QuickBooks with a class or location for each property, and our QuickBooks Online setup for rental property shows how to build that structure.
Many Phoenix investors work with a local CPA who signs the federal and Arizona returns, with bookkeeping handled in-house or by an outside team. When comparing options, ask who will maintain the fixed asset register and keep TPT records for short-term and commercial properties. It also helps to agree who reconciles each property tax bill against the assessor's classification for that parcel.
Our article on outsourced bookkeeping for landlords walks through how a shared workflow runs month to month. For help with Arizona returns and planning, see our page on Arizona real estate CPA services. Owners whose portfolios have grown into an operating business may also want forecasting and lender reporting, which our page on fractional CFO services in Phoenix describes.
Should a Phoenix landlord's books still carry a TPT payable account in 2026? Only for short-term or commercial properties. Long-term residential rent has been outside city TPT since January 1, 2025, so no payable should accrue on it, while transient lodging and commercial lease receipts still need their own TPT accounts.
What is Arizona's income tax rate on rental income? Arizona applies a flat 2.5 percent to taxable income. Rental profit from a Phoenix property is taxed at that rate whether the owner lives in Arizona or files as a nonresident.
Is a short-term rental in Phoenix assessed as a residence or a business for property tax? A short-term rental that the owner does not live in is generally class 4 residential property, assessed at 10 percent. A home the owner occupies as a primary residence is class 3, also at 10 percent, and commercial buildings are class 1 at 15.5 percent for 2026.
Does Arizona allow 100 percent bonus depreciation? Generally yes. Arizona conforms to the Internal Revenue Code as of January 1, 2026, and its depreciation adjustment allows the full federal bonus amount. Qualified production property under section 168(n) is the main exception and must be added back.
When are Maricopa County property taxes due? The first half is due October 1 and is delinquent after November 1. The second half is due March 1 and is delinquent after May 1.
Madras Accountancy supports US CPA firms and their real estate clients with bookkeeping, fixed asset and depreciation schedules, tax return preparation support and monthly reporting, working under the CPA's review. If you want help organizing Phoenix property records for the federal return, the Arizona return and TPT filings, contact our team.
The section 4960 excise tax is 21% of nonprofit pay over $1M. From 2026 it covers all employees. See the medical carve-outs, Form 4720 and a worked example.
The paid family and medical leave tax credit is permanent from 2026. See the 12.5% to 25% rates, the premium option, the 6-month rule and how Form 8994 works.
Opportunity zones become permanent in 2027 under the One Big Beautiful Bill. See the new deferral, rural bonus, and the 2026 handoff.
