Arizona has one of the lowest flat income taxes in the country — 2.5% — and generally doesn’t tax professional services, which makes it a light state for freelancers.
What you pay on freelance profit
| Tax | Rate |
|---|---|
| Federal self-employment tax | 15.3% on 92.35% of profit |
| Federal income tax | 10%–37% |
| Arizona income tax | Flat 2.5% |
| Transaction privilege tax (sales tax) | Generally not on professional services |
The 2.5% flat tax
Arizona has applied a flat 2.5% rate since 2023, and it remains 2.5% for 2026.
Estimated payments: an income test, not a tax test
Arizona’s rule is different from most states’. You must make estimated payments (Form 140ES) only if your Arizona gross income was more than $75,000 (single, head of household or married filing separately) or $150,000 (married filing jointly) in both the prior year and the current year. Due dates match the IRS. Even if you’re not required to, paying estimates can avoid a large bill in April. Size the federal part with the quarterly estimated tax calculator.
TPT: Arizona’s sales tax
Arizona’s sales tax is technically a transaction privilege tax on the seller. Arizona generally does not tax professional services, so a pure service business — design, writing, consulting, development — usually doesn’t need a TPT license. Selling physical goods is taxable, and you’d need a license for that.
How much to set aside
Enter 2.5 in the state field of the tax set-aside calculator.