Picture this: it’s January 1, 2025, you open your rent roll, and that familiar “rental tax” line is suddenly…gone!
Tenants are asking if their rent will drop. Your software still thinks it’s 2024. And you’re wondering what’s legal, what’s smart, and what could blow back later.
If you own rentals in Phoenix, this isn’t a minor tweak; it touches leases, billing, cash flow, and trust with your residents.
The good news? The rules are clear once you learn them. In the next few minutes, you’ll learn precisely what changed, who’s still taxed, what to update today, and what to watch in 2026, so you finish confident, compliant, and in control.
Key Takeaways
- Starting January 1, 2025, cities can’t charge TPT on leases of 30+ days.
- Stop charging it and update leases, invoices, and portals in 2025–2026 to show the reduction.
- Stays under 30 days are still taxed as lodging (hotel/motel).
- You must still file and pay TPT on rent collected through Dec 31, 2024.
- Licenses were updated: rental-only codes were canceled, and mixed-use licenses had their rental codes removed.
- In Phoenix, the old city rate was about 2.3%, so tenants should see a lower total and no rental-tax line.
What Exactly Changed?
Starting January 1, 2025, Arizona stopped cities and towns from adding a “rental tax” (called TPT) to long-term housing, any lease of 30 days or more.
What is TPT? It’s a tax on the landlord’s business revenue (similar to a sales tax on rent). Landlords often listed it as a separate “rental tax” line, even though they were the ones legally taxed.
Short stays are different: hotels, motels, and most Airbnbs under 30 days are still taxed as lodging. For 2025–2026, landlords must remove the old tax from bills and not sneak it back under a new fee name. That rule ends after December 31, 2026, but the core ban continues.
Phoenix-Specific Impact
Phoenix was one of the cities that previously taxed long-term residential rent. With the repeal in place:
- Monthly statements, ledgers, and tenant portals should no longer show “rental tax,” “city tax,” or similar add-ons for 30+ day leases.
- If you used to present rent “plus tax,” the total tenants pay should be reduced by the amount of that former tax line.
- Short-term units in your Phoenix portfolio remain taxable under the lodging classifications; they must be tracked separately.
Lease and Tenant Communication
Lease forms and templates. Update all lease templates to remove rental-tax pass-through language. For existing leases that reference a rental-tax add-on, prepare a brief addendum or written notice confirming that, effective January 1, 2025, there is no city rental tax on long-term residential rent and that billing reflects this change.
Notices. While the change benefits tenants, it’s still smart to send a written notice so there’s a clear record of what changed and when. Keep it simple: date, the affected property/lease, the line item being removed, and the new total amount due.
Clarity over cleverness. Do not re-label the former tax as an “administrative fee,” “compliance fee,” or other catch-all. If a charge looks like a tax replacement, it can invite disputes.
Accounting and Software
Starting January 1, 2025, turn off tax settings for leases of 30 days or longer. Ensure your software, general ledger, receivables, and recurring charges no longer calculate city rental tax on long-term rentals.
Close out 2024. You still owe tax on rent through December 31, 2024, which is usually covered by one last return filed in January.
Plan your budget. Removing Phoenix’s ~2.3% tax on $1,500 rent lowers the bill by about $34–$35 per month. Review statements to confirm no “rental tax” line remains.
Licenses and Registration
TPT licenses. If your license only covered residential rental activity, the state automatically canceled that code for 2025.
If your license covers multiple business activities, the residential rental code was removed, but your other codes remain. This cleanup does not erase any past liabilities. Be sure to file and pay 2024 in full.
Assessor registration. The repeal does not change the separate requirement to register your residential rental with the county assessor (Maricopa County for Phoenix properties). Keep that registration current.
Short-Term vs. Long-Term Rentals
For tax purposes, think in days. Leases of 30 days or more are long-term housing, no city rental TPT, so remove any “rental tax” line from invoices.
Stays under 30 days are short-term lodging and still taxed. If you manage both types, use separate tax rules and GL codes so billing stays accurate.
For furnished, corporate, or mid-term rentals, make the lease and billing match the length. The trigger is consecutive days of occupancy.
What It Means in Dollars
For Phoenix renters, this change means real savings. On $1,500 rent, removing the former 2.3% city rental tax cuts the bill by about $34–$35 a month.
For landlords, the win is cleaner operations: delete the tax line from leases and ledgers, tax short-term stays correctly, and finish all 2024 filings.
Risks of Non-compliance
- Tenant disputes. Continuing to charge the repealed tax, or slipping in a look-alike fee, can spark complaints or legal challenges.
- Audit and penalties for past periods. If 2024 returns are missing or underpaid, expect notices even if your 2025 license status changed.
- Reputation risk. Phoenix renters talk, and the media takes notice of fee transparency. Clear bills build trust.
What to Watch After 2025
- Budget shifts. With rental-tax revenue gone, cities may explore other revenue options. That doesn’t mean a specific increase is guaranteed, but it’s worth tracking.
- Post-sunset behavior. The tenant-facing reduction requirement ends after 2026, but the ban on the tax itself stays. Keep pricing transparent and aligned with the ongoing prohibition.
- Form updates. Expect periodic updates from industry groups and software providers. Adopt new templates promptly so staff aren’t working from outdated language.
Seize the Simplicity Before It Slips
As of January 1, 2025, the city rental tax will be waived on leases of 30 days or longer. Remove the tax line, update leases and software, and close out 2024 returns. Continue to tax stays under 30 days, maintain assessor registration, and document any changes.
Do these now and you’ll avoid disputes, earn tenant trust, and run cleaner books, ready for the 2026 sunset and whatever comes next.
Want this done right the first time? RPM Phoenix will audit your leases, scrub tax language, reconfigure your accounting and portals, separate short-term from long-term billing, and prepare a clear tenant notice, ensuring you stay compliant, avoid disputes, and maintain predictable revenue.
Book a quick consult, and let our local team roll this out across your portfolio with zero downtime!
FAQ
When did the city rental tax end, and for which rentals?
January 1, 2025, cities can’t charge TPT on leases of 30+ days.
Are short-term rentals still taxed?
Yes, stays under 30 days remain taxed as lodging/hotel.
Do I still owe anything for 2024?
Yes, file and pay TPT on rent collected through December 31, 2024.
Do I need to cancel my TPT license?
Rental-only codes were auto-canceled for 2025; mixed-use licenses kept other codes, still close out 2024.
Additional Resources
Rent Collection Strategies to Improve Your Cash Flow
Uncommon Rental Property Tax Deductions You Should Know in Phoenix, AZ
