$5,324 difference over 30 yearsFor one couple (both 60, $2M, 60/40, $80,000 a year to spend after tax), QuantCalc's 51-state planner study found a median 30-year income-tax bill (federal + state + IRMAA) of $193,609 in California and $198,933 in Arizona — California is the cheaper state by $5,324.
California vs Arizona at a glance
| Factor | California | Arizona |
|---|---|---|
| State income tax | 13.30% top | 2.50% top |
| Taxes Social Security | No | No |
| Taxes 401(k)/IRA | Yes | Yes |
| State estate/inheritance tax | No | No |
| Tax on $100k withdrawal | $1,630/yr | $1,290/yr |
| Retirement-friendliness | high tax | friendly |
| 30-yr median income tax, federal + state + IRMAA (MC) | $193,609 | $198,933 |
| 30-yr state income tax (MC) | $31,115 | $36,841 |
| 30-yr success rate (MC) | 83.37% | 83.27% |
| Median balance at 90 (MC) | $2,082,829 | $2,073,138 |
The income-tax difference, year by year
The simplest way to see the gap: take a married couple, both 65, whose only income is a $100,000 IRA withdrawal split evenly between them. On that withdrawal California collects $1,630 in state income tax and Arizona collects $1,290 — a difference of $340 every year. Both figures are QuantCalc's state tax engine run on the couple's whole 2026 return in each state, so each state's own brackets, deductions, retirement-income exclusions and credits apply. The highest top marginal rate in the U.S., with a mental-health surcharge on income above the surtax threshold. One flat bracket since the 2023 reform, exempts Social Security.
California reaches 13.30% only above $1,000,000 of taxable income: a 12.30% bracket rate plus a 1.00% surcharge on the excess. A $100,000 annual withdrawal never reaches that threshold, so the surcharge adds nothing to the withdrawal figures on this page.
Over a 30-year retirement, QuantCalc's 51-state planner study (one couple, identical portfolio and after-tax spending in both states, only the state changes; every year priced by the planner's federal and state tax engines) puts the median income-tax difference at $5,324.
Beyond income tax
State income tax is only part of the retirement-cost picture. When comparing California and Arizona, also weigh:
- Property tax — a tax-free-income state can still have high property tax; factor your home value.
- Sales tax — affects every dollar you spend, not just income.
- Estate / inheritance tax — California: none; Arizona: none. Matters for larger estates.
- Roth conversion cost — converting in the lower-income-tax state of the two cuts the state tax on each converted dollar. See conversion-tax scenarios.
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Deep-dive either state: California retirement tax guide · Arizona retirement tax guide. Or see the full 50-state comparison and the 51-state Monte Carlo study.
FAQ
Is California or Arizona better for retirement taxes?
On income tax, California is the lighter-tax state. In QuantCalc's 51-state planner study, one couple (both 60, $2M, $80,000 a year to spend after tax) pays a median $193,609 of federal and state income tax and IRMAA over 30 years in California versus $198,933 in the other — a $5,324 difference on identical income and spending.
Does California tax Social Security and 401(k) withdrawals?
California does not tax Social Security benefits and taxes 401(k)/traditional IRA distributions at the state level. The highest top marginal rate in the U.S., with a mental-health surcharge on income above the surtax threshold.
Does Arizona tax Social Security and 401(k) withdrawals?
Arizona does not tax Social Security benefits and taxes 401(k)/traditional IRA distributions at the state level. One flat bracket since the 2023 reform, exempts Social Security.
How much would moving from California to Arizona save on retirement taxes?
For a married couple, both 65, whose only income is a $100,000 IRA withdrawal split evenly between them, the state income tax is $1,630 in California versus $1,290 in Arizona — $340 per year of difference. Over 30 years, the planner study's median income-tax gap was $5,324. Don't forget property tax, sales tax, and estate tax also differ — see the table above.
Last updated 2026-10-12. State tax data 2026 (Tax Foundation + state DoR); the withdrawal figures are QuantCalc's state tax engine. Monte Carlo figures from the QuantCalc 51-state planner study (v2026.3, re-run 2026-10-12, CC-BY-4.0): one couple, both 60, $2M, 60/40, $80,000 a year to spend after tax, in each state. Educational only, not tax advice.