No one likes to pay thousands of dollars in property taxes each year, especially when they don’t have to! Here in Arizona, qualified widows, widowers and disabled individuals can save up to $4,188 in annual property taxes through an exemption allowed in Arizona law. Qualifying for this exemption over a ten-year period could save you over $40,000 in property taxes!
As a widow, widower or disabled individual, qualification for the property tax exemption is tied to two things:
- the value of your real estate
- your household income.
These amounts can change each year based on inflation. Let’s take a look at the first qualification; real estate value.
The Value of Your Real Estate: Your Assed Value
Every year your county assessor provides an assessment of real estate values which then indicates how much in property taxes you owe for the upcoming year. This annual assessment determines something called the Limited Property Value (LPV) which is based on a formula that often results in an LPV less than your property’s market value.
For example, the LPV of a home might be about 60% of last year’s market value. Ten percent of your LPV equals the Assessed Value. If your realtor or a pricing service such as Zillow puts your home market value at $600,000, the LPV could be around $360,000 which means the Assessed Value is $36,000. It’s the Assessed Value that is used to determine the first part of your qualification for property tax exemption.
In 2023, an Assessed Value of $28,459 or less meets the part of the qualification for the property tax exemption.
An Assessed Value of $28,459 means the LPV is ten times that amount or $289,459. And, in our example, we assumed LPV was about 60% of recent market value (which is a very rough rule of thumb and may not be an accurate reflection of your residential area), resulting in a home market value of around $475,000.
If the market value of your home is $475,000 or less, you may be on your way to meeting that first qualification. The key is the Assessed Value on your current Property Notice of Valuation, not your home’s market value. Unfortunately, if your Assessed Value is just one dollar more, $28,460, the exemption completely goes away! There’s no proration or scale that results in getting a portion of the exemption.
What about that second qualifier, household income?
The income qualifier is a little tricky. Not only is the widow’s income included in determining her eligibility but also the income earned by any of her children who resided in her house the preceding year.
For example, if the widow earned $30,000 and her 19-year-old child living with her earned $10,000 in wages, the total household income is $40,000.
What kind of income must I include in this calculation? As a rough estimate of income, use last year’s tax and financial information. Add the appropriate amounts from the first six items below
- Adjusted Gross Income (AGI) from your last tax return. This is normally found on the first page of your Arizona tax return.
- Capital gains that were excluded from AGI.
- Benefits received during a strike and considered nontaxable.
- Nontaxable interest received from the federal government.
- Retirement payments received from the State of Arizona or the Federal government. Do not include unemployment benefits, workers’ compensation payments, Railroad Retirement benefits, Social Security
- benefits or Veterans Disability pensions.
- Any other pension or annuity amount that is not otherwise exempted.
Also, do not include income from the following sources:
- Cash public assistance and relief.
- Loss of time insurance.
- Gifts from nongovernmental sources, surplus foods or other relief in kind supplied by a governmental agency.
If the widow lived by herself in the preceding year (i.e., no children under the age of 18 lived with her), her income cannot exceed $34,901 that year. If the widow had one or more children under the age of 18, or with a total and permanent disability, residing with her, the household income limit increases to $41,870.
In the earlier example where the widow and her 19-year-old child earned $40,000 together, she exceeds the $34,901 income limit and does not meet this income qualification. If the widow’s second child, age 17, lived with her in the preceding year, the income limit is $41,870. In this situation, the $40,000 of household income earned by the widow and her 19-year-old child living with her meets the income qualification.
Applying for the Property Tax Exemption
Applying for this property tax exemption requires an initial filing by submitting an affidavit to your county assessor. The affidavit should detail your prior year’s household income. Make sure to reference Section 42-11152. Placing a call to your county assessor prior to submitting the affidavit may clear up any questions. The assessor may require additional proof of the facts stated by you before allowing an exemption.
Subsequent submissions do not require an affidavit, but the widow is required to calculate household income on an annual basis for each preceding year and notify the county assessor in writing of any event that disqualifies her from further exemptions.
This valuable property tax exemption goes away if:
- The widow dies,
- The widow remarries,
- The widow’s household income exceeds the limits mentioned earlier,
- The widow sells the property, or
- The widow gifts the property to another person and/or titles the home out of her name and into the name of another individual or entity.
If the widow is also disabled or a disabled veteran, she may qualify for the property tax exemption under more than one category. However, she can only earn the exemption under one category.
Eligibility for the Arizona property tax exemption is nuanced. Arizona residents should contact their county assessor for more details. For non-Arizona residents, ask your respective county assessor if such an exemption exists in your county.
Through the Widowed Community, I offer fee-only, fiduciary financial planning advice to widows and widowers. Schedule a consultation to learn more about how I work with my clients.