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HB2120 - 572R - S Ver
Senate Engrossed
House Bill
property tax
exemption; disability; determination
State of Arizona
House of Representatives
Fifty-seventh Legislature
Second Regular Session
2026
HOUSE BILL 2120
AN
ACT
amending section 42-11111, Arizona
Revised Statutes; relating to property tax exemptions.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it
enacted by the Legislature of the State of Arizona:
Section 1. Section 42-11111, Arizona Revised
Statutes, is amended to read:
START_STATUTE
42-11111.
Exemption for property; widows and widowers; persons with a total
and permanent disability; veterans with a disability; definitions
A. The property of widows
and widowers, of persons with total and permanent disabilities and of veterans
with service or nonservice connected disabilities who are residents of this
state is exempt from taxation as provided by article IX, section 2,
Constitution of Arizona, and subject to the conditions and limits prescribed by
this section.
B. Pursuant to article IX,
section 2, subsection F, Constitution of Arizona, the exemptions from taxation
under this section are allowed as provided in subsections C, D and E of this
section.
C. The
property of a veteran with a service-connected disability whose
disability rating by the United States department of veterans affairs is one
hundred percent is fully exempt from taxation. The surviving spouse
of a veteran whose property is eligible for the exemption under this subsection
may continue to claim the full exemption as long as the surviving spouse uses
the property as the surviving spouse's primary residence and the surviving
spouse does not remarry.
C. The primary residence of a veteran with a service-connected
disability whose disability rating by the United States department of veterans
affairs is one hundred percent is fully exempt from taxation. The
surviving spouse of a veteran whose primary residence is receiving the
exemption under this subsection may continue to claim the full exemption for
the surviving spouse's primary residence as long as the surviving spouse does
not remarry.� For the purposes of this subsection, a primary residence that is
owned by a veteran who is eligible for the exemption under this subsection and
the veteran's spouse shall be treated as if owned solely by the veteran.
D. The property of a
veteran with a nonservice-connected disability whose disability rating by
the United States department of veterans affairs is one hundred percent or less
or with a service-connected disability whose disability rating by the
United States department of veterans affairs is less than one hundred percent
is exempt in the amount of $4,188. The limit under this subsection
is further limited by multiplying the total exemption amount by the percentage
of the veteran's disability, as rated by the United States department of
veterans affairs.
E. The property of a widow
or widower or a person with a total and permanent disability is exempt in the
amount of:
1. $4,188 if the person's
total assessment does not exceed the amount provided in paragraph 2 of this
subsection.
2. No exemption if the
person's total assessment exceeds $28,459.
F. On or before December
31 of each year, the department shall increase the following amounts:
1. The total allowable
exemption amount under subsection D and subsection E, paragraph 1 of this
section based on the average annual percentage increase, if any, in the GDP
price deflator in the two most recent complete state fiscal years.
2. Beginning in tax year
2026, the total assessment limit amount under subsection E, paragraph 2 of
this section based on the average annual percentage increase, if any, in the
federal house price index for the two most recent complete state fiscal years.
3. The total income limit
amounts under subsection H, paragraphs 1 and 2 of this section based on the
average annual percentage increase, if any, in the GDP price deflator in the
two most recent complete state fiscal years.
G. For the purpose of
determining the amount of the allowable exemption pursuant to subsection E
of this section, the person's total assessment shall not include the value of
any vehicle that is taxed under title 28, chapter 16, article 3.
H. Pursuant to article IX, section 2, subsection F,
Constitution of Arizona, to qualify for
this
an exemption under
this section, the total income from all sources of the claimant and the
claimant's spouse and the income from all sources of all of the claimant's
children who resided with the claimant in the claimant's residence in the year
immediately preceding the year for which the claimant applies for the exemption
shall not exceed:
1. $34,901 if none of the
claimant's children under eighteen years of age resided with the claimant in
the claimant's residence.
2. $41,870 if one or more
of the claimant's children residing with the claimant in the claimant's
residence either:
(a) Were under eighteen
years of age.
(b) Had a total and
permanent physical or mental disability, as certified by competent medical
authority as provided by law.
I. For the purposes of
subsection H of this section, "income from all sources" means the sum
of the following, excluding the items listed in subsection J of this section:
1. Adjusted gross income
as defined by the department.
2. The amount of capital
gains excluded from adjusted gross income.
3. Nontaxable strike
benefits.
4. Nontaxable interest
that is received from the federal government or any of its instrumentalities.
5. Payments that are
received from a retirement program and paid by:
(a) This state or any of
its political subdivisions.
(b) The United States
through any of its agencies, instrumentalities or programs, except as provided
in subsection J of this section.
6. The gross amount of any
pension or annuity that is not otherwise exempted.
J. Notwithstanding
subsection I of this section, income from all sources does not include monies
received from:
1. Cash public assistance
and relief.
2. Railroad retirement
benefits.
3. Payments under the federal
social security act (49 Stat. 620).
4. Payments under the
unemployment insurance laws of this state.
5. Payments from any
veterans pensions.
6. Workers' compensation
payments.
7. Loss of time insurance.
8. Gifts from
nongovernmental sources, surplus foods or other relief in kind supplied by a
governmental agency.
K. A widow or widower, a
person with a total and permanent disability or a veteran with a disability
shall establish eligibility for exemption under this section by filing an
affidavit with the county assessor under section 42-11152 when initially
claiming the exemption. Each year thereafter, the person or the person's
representative shall annually calculate income from the preceding year to
ensure that the person still qualifies for the exemption and notify the county
assessor in writing of any event that disqualifies the person from further
exemption. Regardless of whether the person or representative notifies the
assessor as required by this subsection, the property is subject to tax as
provided by law from the date of disqualification, including interest,
penalties and proceedings for tax delinquencies. Disqualifying events include:
1. Except as provided in subsection C of this
section, the person's death.
2. The remarriage of a widow or widower.
3. The person's income from all sources exceeding
the limits prescribed by subsection H of this section.
4. The conveyance of title to the property to
another owner.
L. Any dollar amount of exemption that is unused in
a tax year against the limited property value of property and improvements
owned by the individual may be applied for the tax year against the value of
personal property subject to special property taxes, including the taxes
collected pursuant to title 5, chapter 3, article 3 and title 28, chapter 16,
article 3.
M. The property tax exemptions provided in
subsections C, D and E of this section are exclusive from each other, and an
individual is not entitled to property tax exemptions under more than one
category as a widow or widower, a person with a total and permanent disability
or a veteran with a disability even if the individual is eligible for an
exemption in more than one category.
N. For the purposes of this section:
1. "Competent medical authority" means any
of the following:
(a) An individual licensed under title 32, chapter
8, 13, 14, 17, 19.1, 25 or 29 or a comparable law of another state.
(b) A registered nurse practitioner as defined in
section 32-1601.
(c) The United States department of veterans
affairs, as evidenced by a disability award letter.
(
d
) The united
States social security administration, as evidenced by a written determination
letter.
2. "Federal house price index" means the
average measure of movement of single-family house prices in the United
States published by the federal housing finance agency, or its successor, for
this state.
3. "GDP price deflator" means the average
of the four implicit price deflators for the gross domestic product reported by
the United States department of commerce or its successor for the four quarters
of the state fiscal year.
4. "Person with a total and permanent
disability" means a person who is unable to engage in any substantial
gainful activity, for pay or profit, by reason of any physical or mental
impairment that is expected to last for a continuous period of at least twelve
months or result in death within twelve months as certified by a competent
medical authority.
5. "Veteran" means an individual who has
served in, and been discharged, separated or released under honorable
conditions from, active or inactive service in the uniformed services of the
United States, including:
(a) All regular, reserve and national guard
components of the United States army, navy, air force, marine corps and coast
guard.
(b) The commissioned corps of the national oceanic
and atmospheric administration.
(c) The commissioned corps of the United States
public health service.
(d) A nurse in the service of the American red cross
or in the army and navy nurse corps.
(e) Any other civilian service that is authorized by
federal law to be considered active military duty for the purpose of laws
administered by the United States secretary of veterans affairs.
END_STATUTE