The Short Answer
Active-duty pay of members serving in the active or reserve components is fully exempt from Arizona income tax. Your base pay is set by the federal pay table — identical to every other state for your rank and years of service. What actually changes in Arizona is your BAH (averaging $1,400/mo without dependents and $1,700/mo with dependents) and how Arizona treats the taxable portion of your pay.
State tax status: ✗ TAXED
2026 Worked Example — E-5, 6 Years, With Dependents in Arizona
Here is how the math actually lands for a mid-career enlisted member stationed in Arizona, built the way I read my own LES. Base pay and BAS are federal; the Arizona BAH figure is the state average.
| Monthly line item | Amount | Taxable? |
|---|---|---|
| Base pay (E-5, over 6 yrs) | $3,874 | Yes (federal + state) |
| BAH with dependents (Arizona avg) | $1,700 | No — tax-free |
| BAS (enlisted) | $476.95 | No — tax-free |
| Gross monthly entitlements | $6,050.95 | — |
| Taxable income (base pay only) | $3,874 | — |
| Est. Arizona state income tax | varies — see notes | — |
Only the $3,874 of base pay is taxable — the $2,176.95 of BAH + BAS is completely tax-free. Run your exact rank, ZIP, and dependency status in the Military Pay Calculator for a precise estimate.
How Arizona Taxes Each Type of Military Pay
Active-Duty Base Pay
Active-duty pay of members serving in the active or reserve components is fully exempt from Arizona income tax.
Guard & Reserve Drill Pay
National Guard and Reserve pay is included in the full exemption for active or reserve component compensation.
Military Retirement Pay
Military retirement pay is 100% exempt from Arizona income tax (full subtraction).
VA Disability Compensation
VA disability compensation is exempt federally and is not taxed by Arizona.
SCRA & Residency in Arizona
Under MSRRA, a military spouse may elect the servicemember's legal residence and avoid Arizona tax on wages earned in-state.
This is the single most misunderstood rule in military pay. Your home of record / state of legal residence — not your duty station — generally determines who can tax your military pay. Changing it is a deliberate act, not something that happens automatically when you PCS.
Major Military Installations in Arizona
- Luke Air Force Base
- Davis-Monthan Air Force Base
- Fort Huachuca
- Marine Corps Air Station Yuma
BAH is set by the Military Housing Area covering your duty ZIP. Verify your exact rate at the official DoD BAH lookup.
Official Sources
FAQ — Military Pay in Arizona
Does Arizona tax my military base pay?
Active-duty pay of members serving in the active or reserve components is fully exempt from Arizona income tax.
Is my BAH taxed in Arizona?
No. BAH is federally tax-free and is never counted as income for Arizona state income tax, regardless of how Arizona treats base pay.
Does Arizona tax military retirement pay?
Military retirement pay is 100% exempt from Arizona income tax (full subtraction).
I'm stationed in Arizona but my home of record is elsewhere — who taxes me?
Under MSRRA, a military spouse may elect the servicemember's legal residence and avoid Arizona tax on wages earned in-state.