01/02/2025
NO MORE MONTHLY RENTAL TAX!!
From Patrick McQueen, esq...
In 2023, Arizona passed legislation that will eliminate the rental tax on long-term residential leases, effective January 1, 2025. This law requires landlords to stop charging the rental tax on rent and certain other fees, such as late fees, that were previously taxed.
Specifically, on January 1st, landlords must stop charging the rental tax on long-term residential leases, as well as on any additional charges previously subject to tax. For example, if you currently charge a $5 late fee with an additional tax, the new fee should be $5, with the tax portion removed.
Landlords are also required to reduce the rent charged to tenants by the amount previously collected as tax. If your rent was $1,000 plus a $50 rental tax, the new rent starting January 1, 2025, should be $1,000. It is important to ensure that any charges previously taxed are adjusted accordingly.
Because of this new law, it is highly recommended to notify tenants as early as possible about the tax removal and the resulting rent reduction via formal notification or lease amendment.
And, for leases beginning on or after January 1, 2025, it is crucial to remove any references to rental tax from lease agreements. Similarly, landlords should review and update their billing processes to ensure that no tax is being applied to rent or fees.
The rental tax elimination only applies to long-term residential leases. Commercial properties, short-term rentals, hotels, motels, and healthcare facilities are exempt from this change. Landlords should ensure that they are applying the tax elimination only where required and continue to charge the rental tax where applicable.