If you own a rental in Scottsdale or plan to sell one soon, a big change just arrived. Arizona ended city rental taxes on long-term leases starting January 1, 2025, and that shifts how you present your rent roll, your NOI, and your buyer conversations. You want clarity, clean numbers, and confidence that you are compliant. In this guide, you will learn exactly what changed, who it affects in Scottsdale, how to prepare your documents, and how it may influence value. Let’s dive in.
What Arizona changed in 2025
Arizona lawmakers passed SB 1131, which prohibits cities and towns from charging transaction privilege tax on the business of renting or leasing residential property, effective January 1, 2025. You can read the law in the official bill text for details and definitions. See SB 1131.
Applies to long-term rentals
According to Arizona Department of Revenue guidance, long-term residential rentals are generally stays of 30 consecutive days or more. These leases were the ones that previously faced municipal rental TPT and are now exempt. Review ADOR’s rental guidelines.
What the law does not change
- Short-term stays, less than 30 days, still face transient lodging taxes and city rules. Scottsdale continues to enforce its registration and nuisance standards for vacation rentals. Check Scottsdale’s short-term rental page.
- Federal and state income tax rules still apply. Capital gains, depreciation recapture, and 1031 exchanges follow IRS rules. See IRS Publication 523.
What it means in Scottsdale
Before 2025, Scottsdale landlords of long-term rentals often collected a city rental tax as a line item or within gross rent. The ban requires landlords to stop charging tenants for that tax beginning January 1, 2025. City and state pages note the change and confirm that long-term residential rent is no longer taxable at the municipal level.
Who benefits in Scottsdale
- Renters in long-term units should no longer see a city rental tax line after January 1, 2025.
- Landlords gain a simpler bill and no longer remit that specific tax, although lease terms and market pricing still drive gross rents.
Valuation and investor demand
The removal of a small city rental tax rarely moves value on its own. Most investors underwrite to actual and normalized NOI, local rent trends, and cap rates. As one overview notes, the valuation effect is likely modest and depends on your rent strategy and buyer pool. Read a neutral overview.
- If you previously passed the tax through to tenants, your pre-tax cash flow may not change much unless you adjust rents.
- Some investors will appreciate simpler statements without a tax line. Others will focus on rent growth and expenses.
What to update before you list
Present clean, credible documentation that aligns with the new law. Use this checklist to get market-ready:
- Confirm the effective date and keep a copy of the law in your file. SB 1131 text.
- Build an itemized rent roll that shows historical gross rent, any prior rental tax pass-throughs, and your post-1/1/2025 rent and NOI. ADOR update for landlords.
- Gather TPT filings and remittance receipts for the last 12 to 36 months to support historical numbers. ADOR update for landlords.
- Review lease language that referenced rental taxes. Document notices, credits, or invoice changes you provided to tenants starting January 1, 2025. Law text for reference.
- Add a simple disclosure in your seller documents stating the change and how you implemented it. This reduces questions at escrow. Law text for reference.
- Coordinate with your CPA on handling any credits or refunds and on federal tax items like gains and recapture. IRS Publication 523.
Selling a short-term rental in Scottsdale
If you are selling a vacation rental, this ban does not remove Scottsdale transient lodging taxes or city STR rules. Buyers will still underwrite STR income with bed taxes, registration, and compliance in mind. Provide proof of registration, tax filings, and any good-neighbor measures. Review Scottsdale’s STR requirements.
Watch the city budget
The League of Arizona Cities and Towns estimated about 230 million dollars in annual municipal revenue loss statewide after the ban. See the League’s summary. Local reports estimate Scottsdale’s share at about 14.7 million dollars per year. Read local coverage. Cities may respond with changed fees, services, or other adjustments, so keep an eye on Scottsdale budget actions over the next few years.
The bottom line for Scottsdale sellers
For long-term rentals, the rental tax ban removes a line item and a filing task. It does not change federal taxes, and it does not erase bed taxes on short stays. Your best move is to present a transparent rent roll, updated leases, and clean support for your historical NOI so buyers can underwrite with confidence.
If you would like help packaging your property for a stronger outcome, reach out to Greg Hague. You will get a straightforward plan to create demand, compress time on market, and protect your price.
FAQs
When did Arizona’s rental tax ban take effect for Scottsdale landlords?
- It took effect January 1, 2025, and applies to long-term residential rentals of 30 days or more. See SB 1131 and ADOR guidance.
Does the ban reduce my capital gains taxes when I sell a Scottsdale rental?
- No. The ban removes city rental TPT on long-term rents. It does not change federal capital gains rules, depreciation recapture, or 1031 exchanges. IRS Publication 523.
How should I handle rental tax line items in existing leases after January 1, 2025?
- Landlords must stop charging the residential rental TPT starting January 1, 2025. Document any invoice changes or tenant credits and keep copies for buyers. Law text and ADOR update.
I am listing a Scottsdale vacation rental. Do bed taxes still apply?
- Yes. Short stays under 30 days remain subject to transient lodging taxes and city STR rules. Scottsdale STR page.
Will buyers expect a price discount because of the ban in Scottsdale?
- Not necessarily. Most investors underwrite to actual and normalized NOI. The removal of a small tax line has a modest effect that depends on rents, expenses, and cap rates. Neutral overview.
