A.R.S. § 42-11111: Veteran & Widow Tax Exemption

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, E, F and G of this section.

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 or whose disability status is total disability based on individual unemployability is fully exempt from taxation. 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. Except as provided in subsection F or G of this section, the property of a widow or widower or a person with a total and permanent disability whose income from all sources does not exceed the limits prescribed by subsection J of this section 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. The primary residence of a widow or widower who is the surviving spouse of a veteran who was eligible for the exemption under subsection C of this section is fully exempt from taxation.

G. The primary residence of a widow or widower who is the surviving spouse of a veteran who was eligible for the exemption under subsection D of this section 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 that veteran's disability, as rated by the United States department of veterans affairs.

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

1. The total allowable exemption amount under subsection D, subsection E, paragraph 1 and subsection G 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 J, 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.

I. 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.

J. Pursuant to article IX, section 2, subsection F, Constitution of Arizona, to qualify for the exemption prescribed in subsection E 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.

K. A person 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 and, if claiming the exemption under subsection F or G of this section, providing evidence of the veteran spouse's disability rating by the United States department of veterans affairs or total disability based on individual unemployability to the county assessor. Each year thereafter, the person who claims the exemption prescribed in subsection E of this section or the person's representative shall annually calculate income from the preceding year to ensure that the person still qualifies for the exemption. The person or the person's representative shall notify the county assessor in writing of any disqualifying event. Regardless of whether the person or the person's representative notifies the county assessor as required by this subsection, the property is subject to tax as provided by law from the date of the disqualifying event, including interest, penalties and proceedings for tax delinquencies. A disqualifying event includes:

1. The person's death.

2. The remarriage of a widow or widower.

3. For the exemption prescribed in subsection E of this section, the person's income from all sources exceeding the limits prescribed by subsection J of this section.

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

L. In order for a subsequent primary residence of a person who claims any of the exemptions prescribed by this section to be eligible for exemption, within sixty days after the subsequent primary residence becomes the person's primary residence the person must file with the county assessor of the county in which the subsequent primary residence is located a fully completed exemption transfer form as prescribed by the department.

M. 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.

N. The property tax exemptions prescribed in subsections C, D, E, F and G of this section are exclusive from each other, and an individual is not entitled to property tax exemptions under more than one subsection even if the individual is eligible for an exemption in more than one subsection.

O. 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. "Income from all sources":

(a) Means the sum of the following:

(i) Adjusted gross income as defined by the department.

(ii) The amount of capital gains excluded from adjusted gross income.

(iii) Nontaxable strike benefits.

(iv) Nontaxable interest that is received from the federal government or any of its instrumentalities.

(v) Payments that are received from a retirement program and paid by this state or any political subdivision of this state or the United States through any of its agencies, instrumentalities or programs, except as provided in subdivision (b) of this paragraph.

(vi) The gross amount of any pension or annuity that is not otherwise exempted.

(b) Does not include monies received from:

(i) Cash public assistance and relief.

(ii) Railroad retirement benefits.

(iii) Payments under the federal social security act (49 Stat. 620).

(iv) Payments under the unemployment insurance laws of this state.

(v) Payments from any veterans pensions.

(vi) Workers' compensation payments.

(vii) Loss of time insurance.

(viii) Gifts from nongovernmental sources, surplus foods or other relief in kind supplied by a governmental agency.

(iv) Veterans disability payments due to the disability rating or status of total disability based on individual unemployability.

5. "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.

6. "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.