Still Charging a Tax That No Longer Exists?
Your lease might still say "plus applicable rental tax," and that single phrase could put you on the wrong side of Arizona law. As of January 1, 2025, cities and towns across the state, including Phoenix, lost the authority to tax long-term residential rent, yet plenty of lease templates never got the memo. If your paperwork still itemizes a tax charge, references a percentage tied to the old Phoenix rate, or tells tenants they owe reimbursement for a municipal rental tax, you're carrying language that isn't just outdated; it's a liability. This guide breaks down exactly what needs to come out of your lease, why it matters, and how to bring your paperwork into compliance. Rely Real Estate has managed rental properties across Phoenix Metro long enough to know that the details tenants never think twice about, like a stray tax line item, are often the ones that create the biggest headaches for owners.
Key Takeaways
Phoenix's rental tax is gone for good. Since January 1, 2025, Arizona law bars cities and towns from taxing residential leases of 30 days or more.
Old lease language creates real legal exposure. Tenants have a legal right to sue landlords who keep collecting a tax that no longer applies.
Three specific lease elements need to go. Tax line items, "plus tax" reimbursement clauses, and outdated rent totals all require updating before your next renewal.
Compliance doesn't wait for a complaint to matter. The Arizona Attorney General's office and tenant advocacy groups are actively watching for landlords who haven't updated their leases.
Fixing the lease is the easy part. Catching every reference across templates, renewals, and billing systems is where most owners fall behind, and it's exactly where a professional property manager earns their keep.
What Arizona's Rental Tax Ban Actually Changed
Arizona lawmakers amended A.R.S. § 42-6004(H) to prohibit any city, town, or taxing jurisdiction from levying a transaction privilege tax, sales tax, or similar fee on residential rentals of 30 consecutive days or longer. The Arizona Department of Revenue confirms the change took effect for all rental periods beginning January 1, 2025, wiping out roughly $230 million in combined annual revenue that cities had collected from tenants for years.
Before the ban, most Arizona municipalities charged this tax at rates between 1% and 4%, and landlords were responsible for collecting and remitting it monthly. That obligation, along with the licenses tied to it, is now gone for anyone operating exclusively in residential rentals.
Why This Matters More in Phoenix
Phoenix previously charged a 2.3% residential rental TPT, one of the more commonly cited rates in the Valley. That means a large share of leases originated by Phoenix owners and Phoenix-based property management companies explicitly itemized this charge for years. If your lease templates were built around that 2.3% figure, there's a good chance the same language is still sitting in active agreements, renewals, and even new leases signed after the deadline.
What to Remove and Update in Your Lease Agreements
The rule itself is simple, but the cleanup touches more of your paperwork than most owners expect. Here's where to look.
Tax Line Items
Strike any separate charge, calculation, or percentage added on top of base rent, including anything tied to Phoenix's former residential rental tax rate. This applies to the lease document itself as well as any rent ledger, invoice template, or statement your tenants receive each month.
What it means: A lease that lists "Base Rent" and "Rental Tax" as two separate figures no longer reflects reality and needs to be collapsed into one line.
Real-world example: A Phoenix owner charging $1,500 in base rent plus 2.3% tax ($34.50) was collecting $1,534.50 monthly. That tax line should have disappeared entirely starting with January 2025 rent, dropping the total back to $1,500 with nothing itemized beneath it.
"Plus Tax" Language
Delete any phrase along the lines of "plus applicable rental tax" or clauses stating the tenant is responsible for reimbursing you for municipal TPT. These clauses are common in older lease templates and renewal riders, and they're easy to miss because they often sit buried in a payment or fees section rather than the rent amount itself.
What it means: Even if you've stopped actually charging the tax, leaving the clause in the lease is a red flag. A tenant, attorney, or auditor who reads that language can reasonably assume you're still entitled to collect it.
Adjusted Totals
Update your stated monthly rent to a single, inclusive base rate that drops the former tax amount entirely. This isn't a formality. Arizona's rules, managed through the Arizona Department of Revenue, require that the rent tenants actually pay reflects this reduction, not just the wording of the lease.
Real-world example: If a lease renewal is generated using an old template, the system might auto-populate last year's total, tax included, without anyone catching it. Reviewing every renewal against the corrected base rent avoids this exact scenario.
The Cost of Leaving Old Tax Language in Place
Arizona's law gives tenants a private right of action to recover any rental tax collected after the January 2025 cutoff, and class action exposure is real for owners with multiple units on the same outdated template. The Arizona Attorney General's office also has enforcement authority here, and tenant advocacy groups have made a point of flagging non-compliant landlords publicly. On top of that, audit risk for pre-2025 filings doesn't disappear just because the tax itself did. For Phoenix owners managing several properties, a single overlooked template can multiply into a portfolio-wide problem fast.
How Rely Real Estate Keeps Phoenix Leases Compliant
This is exactly the kind of detail that's easy to lose track of when you're juggling leasing, maintenance, and tenant communication on your own. Our team reviews lease language, rent collection systems, and financial reporting for every property we manage, so outdated tax references don't slip through on renewals or new move-ins. Owners working with us also get transparent, published pricing and the protection of our owner and tenant guarantees, backed by a track record you can see for yourself in our client testimonials. You can learn more about our Phoenix Metro team on our About page.
Frequently Asked Questions
Do I need to send tenants formal written notice about the rent reduction?
It isn't always legally required, but it's the safest move. Sending written notice, even a short email or letter, documenting the reduced amount protects you if a tenant later questions whether the tax was actually removed.
What about late fees or pet fees that used to include the tax?
Any ancillary charge that previously had a tax component should be recalculated to remove it. A $50 late fee that once carried an added tax amount should now be a flat $50, with no separate tax calculation layered on top.
Am I still required to register my property with anyone?
Yes. Eliminating the rental tax didn't eliminate county-level requirements. Phoenix-area owners must still register residential rental properties with the Maricopa County Assessor, separate from any TPT licensing that may have applied before.
Ready to Clean Up Your Lease Before It Costs You?
Arizona's rental tax ban has been in effect since January 2025, but old lease language has a way of outliving the law it was written under. Removing tax line items, "plus tax" clauses, and outdated rent totals protects you from tenant disputes, audits, and Attorney General scrutiny, and it takes far less effort than dealing with the fallout of getting it wrong. If you'd rather have a Phoenix Metro property management team handle the review for you, Rely Real Estate is ready to help. Call us at 623.462.1145 or schedule a consultation, and we'll make sure every lease in your portfolio is compliant, current, and working in your favor.
