Arizona HB 2973: property tax; exemption; income limit

Bill Text

HB2973 - 572R - I Ver 

 REFERENCE TITLE: property tax; exemption; income limit

 State of Arizona

 House of Representatives

 Fifty-seventh Legislature

 Second Regular Session

 2026

 HB 2973

 Introduced by 

 Representative 
 Keshel

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_STATUTE42-11111. 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.

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 
exemption, 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 
$135,000 if none of the claimant's children under 
eighteen years of age resided with the claimant in the claimant's residence.

2. $41,870 
$150,000 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