Arizona Mileage Deduction 2026: Lowest Flat Rate at 2.5%

Arizona has a flat income tax of 2.5%, the lowest flat rate in the country. The state savings per deductible mile are modest, but the math is simple and the federal savings are the same as everywhere else.

Deduction Savings

At 15,000 business miles: $11,400 deduction saves roughly $285 in state taxes plus $4,252 federal. Total: about $4,537. No local income taxes to complicate it.

How to File

Deduct on federal Schedule C, Line 9 at 76¢/mile. Arizona starts with your federal adjusted gross income, so the deduction flows through to your state return. The flat rate makes estimated payment calculations straightforward. Keep a mileage log with the date, destination, purpose, and miles for each trip.

Employer Reimbursement

Arizona does not require private employers to reimburse mileage.

FAQ

Is Arizona's low tax rate a reason to track less carefully?

No. The federal deduction is the big number ($4,252 at 15K miles). Arizona's 2.5% is a bonus. You track for the federal benefit regardless of state rate.

Does my mileage deduction reduce Arizona state taxes?

Yes. Arizona uses your federal AGI as the starting point. Your Schedule C mileage deduction reduces that number, which directly reduces your state tax at the flat 2.5% rate.

Can W-2 employees deduct mileage in Arizona?

No. The mileage deduction for W-2 employees was permanently eliminated under the One Big Beautiful Bill. Arizona does not require employer reimbursement, so if your employer does not reimburse, you have no tax remedy.

Simple tax, simple deduction. Start tracking free →

Related guides