Residential Rental is the rental of real property for a period of 30 or more consecutive days for residential purposes only and not commercial. Residential rental properties are also subject to tax, known as transaction privilege tax (TPT), and imposed when engaged in business under the residential rental classification by the Model City Tax Code. Some cities, not all, opt to tax residential rental income.
TPT is imposed when renters or property management companies engage in business under the residential rental classification by the Model City Tax Code. Individual owners of taxable rental properties are required by law to obtain a TPT license with ADOR regardless if the owners rent the property themselves or employ a property management company (PMC). A license is only required for cities that impose a tax on residential rental activity. To determine if a city tax license is required, taxpayers can use the Residential Rental Licensing Matrix.
For more information, please see What residential rental income is taxable?
Information and Resources
Glossary of Terms:
ADOR: Arizona Department of Revenue
MOU: Memorandum of Understanding – A MOU ensures a PMC has a signed authorization on file from each client who authorizes the PMC to pay and file TPT, including licensing, to ADOR, and the PMC receives tax account information from ADOR to resolve account discrepancies. The MOU will serve as a permit for a PMC to resolve TPT matters with ADOR on each client’s behalf.
PMC: Property Management Company
PO: Property Owner
POA: Power of Attorney – A POA establishes a PMC as the appointee to act on behalf of the PO in all matters concerning the collection and remittance of TPT. This document must be completed and maintained in the PMC file.
TPT: Transaction Privilege Tax
Engage: When a PMC adds property owners to its AZTaxes Property Management license to file and pay on their behalf.
Disengage: When a PMC deletes a property owner from its AZTaxes Property Management license to sever the relationship.
Linking: A process where a PMC connects transaction privilege/use, withholding or corporate tax accounts to its AZTaxes account.
For more information and resources on residential rentals, visit the following links:
If you need further assistance, please call (602)716-RENT(7368), or email [email protected].
You can register, file and pay online at www.AZTaxes.gov. It is fast and secure.
Note: Pursuant to A.R.S. § 42-6013, ADOR has developed a new consolidated return that separately identifies the gross income and deductions for each owner’s property location.