property tax; primary residences; exemptions

HB2841 - 572R - I Ver

REFERENCE TITLE:
property tax; primary residences; exemptions

State of Arizona

House of Representatives

Fifty-seventh Legislature

Second Regular Session

2026

HB 2841

Introduced by

Representative
Livingston

AN
ACT

amending
section 42-11111, Arizona Revised Statutes; amending title 42, chapter
11, article 3, Arizona Revised Statutes, by adding sectionS 42-11134 AND
42-11135; 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
and sections 42-11134 and 42-11135,
as applicable
.

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
,

and
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.

D.
C.
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.
D.
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.
E.
On or before December 31 of each
year, the department shall increase the following amounts:

1. The total allowable
exemption amount under subsection
D

C

and subsection
E
D
,
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
D
, 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
G
,
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.
F.
For the purpose of determining the
amount of the allowable exemption pursuant to subsection
E
D
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.

G.
Pursuant to article IX, section 2, subsection F,
Constitution of Arizona, to qualify for
this

an
exemption
under subsection C or D of 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.
H.
For the purposes of subsection
H
G
of this section,
"income from all sources" means the sum of the following, excluding
the items listed in subsection
J
I

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
I
of this
section.

6. The gross amount of any
pension or annuity that is not otherwise exempted.

J.

I.
Notwithstanding subsection
I

H
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.
J.
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

G
of this section.

4. The conveyance of title to the property to
another owner.

L.
K.
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.
L.
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.
M.
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.

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

Sec. 2. Title 42, chapter 11, article 3,
Arizona Revised Statutes, is amended by adding sections 42-11134 and 42-11135,
to read:

START_STATUTE
42-11134.

Exemption for primary residences of veterans with a one hundred
percent service-connected disability; affidavit; disqualification;
definition

A. Pursuant
to article IX, section 2, Constitution of Arizona, Residential property that is
owned
by a veteran who has a service-connected
disability and the disability rating by the United States department of
veterans affairs is one hundred percent and who occupies the residential
property as the veteran's primary residence is fully exempt from
taxation.

B. The
surviving spouse of a veteran whose primary residence is receiving the
exemption under this section may continue to claim the full exemption for the
surviving spouse's primary residence as long as the surviving spouse does not
remarry.

C. For the
purposes of this section, a primary residence that is owned by a veteran who is
eligible for the exemption under this section and by the veteran's spouse shall
be treated as if owned solely by the veteran.

D. The owner of the property shall
initially establish qualification for exemption under this section by filing an
affidavit with the county assessor under section 42-11152.�

E. A Veteran is disqualified from the
exemption under this SECTION if the COUNTY assessor determines that an
ownership interest was conveyed, transferred or otherwise granted to the
veteran for the primary purpose of qualifying for the exemption.

F. For the purposes of this section:

1. Primary residence does not include
a secondary residence, a residential rental property or any other property that
is not occupied by the owner.

2. "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, space force 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

START_STATUTE
42-11135.

Exemption for primary residences of persons who are at least
sixty-five years of age; affidavit; disqualification

A. Pursuant
to article IX, section 2, Constitution of Arizona,

Residential
property that is owned by a person who is a citizen of the United States, who
is a resident of this state for at least the three tax years immediately
preceding the tax year for which the exemption is claimed, who is at least
sixty-five years of age and who occupies the property as the person's
primary residence is exempt from taxation.

B. For the
purposes of this section, a primary residence that is owned by at least one
person who meets the qualifications prescribed by subsection A of this section
is eligible for the exemption under this section and another person shall be treated
as if owned solely by the person who meets the qualifications prescribed by
subsection A of this section.

C. The owner of the property shall
initially establish qualification for exemption under this section by filing an
affidavit with the county assessor under section 42-11152.

D. A person is disqualified from the
exemption under this SECTION if the COUNTY assessor determines that an
ownership interest was conveyed, transferred or otherwise granted to the person
for the primary purpose of qualifying for the exemption.

E. For the purposes of this section,
Primary residence does not include a secondary residence, a residential rental
property or any other property that is not occupied by the owner.

END_STATUTE

Sec. 3.
Applicability

This act applies to tax years
beginning from and after December 31, 2026.

Sec. 4.
Conditional enactment

This act does not become effective
unless the Constitution of Arizona is amended by a vote of the people at the
next general election by passage of House Concurrent Resolution ______,
fifty-seventh legislature, second regular session, relating to property tax
exemptions.