How Much Tax Do I Pay on Selling Land in Arizona?
When you sell land in Arizona, you typically pay a federal Capital Gains tax between 0% and 20% plus a flat Arizona state income tax of 2.5% on the profit. However, if you bought your land after 2011, Arizona may give you a 25% deduction on that profit before taxing it.
Why This Matters for Landowners
Selling land is different than selling a house. You don’t have a roof to fix or a kitchen to stage. But the money side can still be confusing.
Most people we talk to at Front Porch Land Group are worried about the “tax man.” They want to know how much cash they will actually keep.
Understanding these costs helps you plan. It stops you from getting a surprise bill next April. It also helps you decide if now is the right time to sell.
You need to know a few specific words to understand your tax bill. Here are three terms you will see on your paperwork:
Capital Gains – This is just a fancy word for “profit.” It is the difference between what you sold the land for and what you paid for it. The government taxes the profit, not the total amount of the check you receive.
Cost Basis – This is the original value of your land. Usually, it is the price you paid when you bought it. If you inherited the land, the cost basis is usually what the land was worth on the day the previous owner passed away. This number is very important because a higher basis means lower taxes.
Net Proceeds – This is the money that actually hits your bank account. It is the sale price minus all the fees, commissions, and closing costs. This is the “real” money you get to take home or use for your next adventure.
The Two Types of Taxes You Will Face
When you sell your property, you have to answer to two different groups. You have the federal government (the IRS) and the state of Arizona.
Let’s look at the federal side first. The IRS cares about time.
They want to know how long you owned the dirt.
Short-Term Capital Gains – Did you own the land for less than one year? If yes, the IRS treats your profit like regular income. It is taxed just like the wages from your job. This rate can be anywhere from 10% to 37%, depending on how much money you make in a year.
Long-Term Capital Gains – Did you own the land for more than one year? This is where you want to be. The IRS gives you a break for holding onto the property. Instead of your normal income tax rate, you pay a lower special rate.
Most people pay 15% here.
If your income is lower, you might pay 0%.
If your income is very high, you might pay 20%.
The Arizona State Tax – Arizona keeps things simple. As of recently, Arizona uses a “flat tax.”
That means almost everyone pays the same rate. That rate is 2.5%.
Whether you make a little profit or a huge profit, Arizona generally asks for 2.5% of that gain.
There is one special bonus for Arizona landowners. If you acquired your land after December 31, 2011, the state might let you deduct 25% of your profit before they tax it. That lowers your bill even more.
Don’t Forget Closing Costs
Taxes aren’t the only thing that takes a bite out of your sale price. You also have closing costs.
The good news is that closing costs actually help you with taxes. You can usually subtract these costs from your profit. That means you pay tax on a smaller number.
Here are the costs you will likely see on your settlement statement:
- Title Insurance: This proves you legally own the land. In Arizona, the seller usually pays for the owner’s policy.
- Escrow Fees: The company that handles the paperwork and money charges a fee. This is often split 50/50 between buyer and seller.
- Property Taxes: You have to pay your share of the property taxes for the part of the year you owned the land.
- Recording Fees: The county charges a small fee to file the deed.
If you sell with a real estate agent, you will also pay commissions. On land, commissions can be high. They often run between 6% and 10% of the sale price.
At Front Porch Land Group, we do things differently. We are direct buyers. That means there are no agent commissions. We also cover standard closing costs for the sellers we work with.
As our mission says, we exist to “provide landowners with a trustworthy, hassle-free way to sell their property”. We believe in keeping money in your pocket, not spending it on fees.
Example: The Garcia Family’s Parcel
Let’s look at a real-world example to see how the math works.
Imagine the Garcia family bought a nice 10-acre plot of land in Apache County, Arizona.
They bought it in 2015. They planned to build a cabin, but life got busy. Now, they are ready to sell.
Here are the details of their land:
- Purchase Year: 2015 (They owned it for more than 1 year, so it is Long-Term).
- Original Price: $30,000.
- Selling Price: $80,000.
- Closing Costs: $2,000 (Title fees, recording fees, escrow).
First, we have to find their “Taxable Gain.” We take the selling price and subtract what they paid and their costs.
Step 1: Calculate the Profit
$80,000 (Sale Price)
- $30,000 (Original Cost)
- $2,000 (Closing Costs)= $48,000 (Total Profit)
The Garcias earned $48,000. This is the number the government looks at.
Step 2: Calculate Federal Tax
Let’s assume the Garcias make an average income. They fall into the 15% capital gains bracket.
$48,000 x 15% = $7,200
Step 3: Calculate Arizona State Tax
Because they bought the land in 2015 (after 2011), they get a special break. Arizona lets them ignore 25% of the gain.
$48,000 x 25% deduction = $12,000 deduction.
New Arizona Taxable Amount = $36,000.
Now apply the 2.5% flat tax.
$36,000 x 2.5% = $900
The Final Breakdown
| Item | Amount |
| Sale Price | $80,000 |
| Original Cost | -$30,000 |
| Closing Costs | -$2,000 |
| Cash to Seller (Before Tax) | $48,000 |
| Federal Tax Estimate | -$7,200 |
| Arizona Tax Estimate | -$900 |
| Final Pocket Money | $39,900 |
The Garcias walk away with nearly $40,000 in clear profit.
A Special Note on Inherited Land
We talk to many people who inherited land from a parent or grandparent.
If this is you, you have a huge tax advantage. It is called the “Stepped-Up Basis.”
Usually, your taxes are based on what the original owner paid. If Grandpa bought the land in 1970 for $500, and you sell it for $50,000, that looks like a huge profit. You would owe tax on $49,500.
But the government rules are different for inheritance.
When you inherit land, the “cost” resets. The IRS considers the value of the land to be what it was worth on the day the owner died.
Example for Inherited Land:
- Grandpa bought it for $500 in 1970.
- Grandpa passed away in 2024.
- The land was worth $48,000 in 2024.
- You sell it two months later for $48,000.
Your profit is $0.
($48,000 Sale Price – $48,000 Stepped-Up Basis = $0 Gain).
You would owe zero capital gains tax.
This is a major relief for families. It aligns with our goal to “make letting go of land feel simple and secure”. You shouldn’t be punished for inheriting property.
Ways to Lower Your Bill
Nobody wants to pay more than they have to. Here are a few simple strategies to keep in mind.
Hold for Over a Year – If you bought land recently and can wait, try to hold it for at least 366 days. Moving from Short-Term to Long-Term capital gains can save you a lot of money. The difference usually drops your rate from roughly 24% down to 15%.
Track Your Improvements – Did you install a fence? Did you pay for a survey? Did you clear brush? Keep those receipts. You can add these costs to your “Cost Basis.” If you spent $5,000 on a fence, that is $5,000 less profit you get taxed on.
Sell Directly – Selling the traditional way involves fees. You pay a listing agent and a buyer’s agent. That can eat up 10% of your sale price.
When you sell directly to a buyer like Front Porch Land Group, you skip those fees. A lower cost of selling means more net proceeds for you. It simplifies the math and the process.
The “Front Porch” Approach to Selling
Taxes are complicated. We know that.
At Front Porch Land Group, we believe “selling land should feel like a front porch conversation, simple and honest”.
We aren’t accountants, so we always suggest you double-check your specific numbers with a tax pro. Every situation is unique.
But we are land experts. We know that many landowners feel stuck. You might have a property you haven’t seen in years. You might be tired of paying county property taxes on dirt you don’t use.
You deserve a process that isn’t scary. We offer:
- Real Cash Offers: No waiting on banks.
- Fast Closings: usually in 30 to 60 days.
- No Hidden Fees: We handle the details.
We simplify the process and handle challenges others avoid so you can move forward with confidence.
If you are wondering what your land is worth—and what you could walk away with—let’s chat.