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Arizona's Property Tax Exemption & Deferral

Arizona law permits the reduction, or elimination, of property tax obligations for qualified real property owners and also permits qualified real property owners to defer payment of property taxes until the real property is sold or the real property owner dies. A.R.S. §§ 42-11111 & 42-17302.

Property Tax Exemption

The State of Arizona calculates real property taxes on owner-occupied residences based upon Assessed Value. The Assessed Value is 10% of the Full Cash Value, not 10% of the fair market value.

If the person meets the requirements set forth in A.R.S. § 42-11111, the amount of the current exemption is then subtracted from the Assessed Value. The property tax is then calculated based upon the modified Assessed Value.

Qualification

The exemption is available to individuals in a number of different cirumstances including qualifying widows, widowers, and disabled persons whose income does not exceed particular amounts and whose house does not exceed a particular Assessed Value, which is set forth in A.R.S. § 42-11111.

Property Tax Calculation

For example, a woman who meets the requirements set forth in A.R.S. § 42-11111 resides in and owns a home with an Assessed Value of $15,0000. In 2011, the exemption amount is $3,488. After substracting the exemption from the Assessed Value, her property tax will be caclulated based upon an Assessed Value of $11,512 ($15,000 - $3,488).

Property Tax Deferral

Arizona law permits a qualified individual to elect to defer the payment of property taxes on that individual's qualifying residence for a particular year.

Qualification

In order to be qualified, the individual must meet the following requirements:

1. The individual shall be at least seventy years of age on the date the deferral claim form is filed.

2. The individual, either individually or with another individual who resides in the residence, shall own the residence or be purchasing the residence under a recorded instrument of sale or shall hold the property under the terms of a real estate trust.

3. The individual must either:

(a) Have lived in the current residence for at least six years immediately preceding the date the deferral claim form is filed.

(b) Have lived in this state for at least ten years immediately preceding the date the deferral claim form is filed.

4. The individual may not own or have any legal, equitable, beneficial or security interest in any other residence or other real property, wherever it may be located, except indirectly through an investment security, such as a mutual fund, that includes real property among its assets.

A.R.S. § 42-17302(B)(1)-(B)(4)

In addition, "the total taxable income of all persons residing in the residence for the taxable year immediately preceding the current year may not exceed ten thousand dollars." A.R.S. § 42-17302(D).

Property tax deferals are also available to married couples who meet the requirements for individuals and who "[c]onsent to the deferral of taxes, regardless of whether both spouses have an ownership interest in the residence." A.R.S. § 42-17302(C).

Payment

The deferred property taxes, plus interest, must be paid upon the occurrence of one of the following events as set forth by statute:

1. The individual who claimed the deferral dies without a surviving spouse who qualifies under section 42-17302.

2. The tax deferred residence is sold or becomes subject to a fully executed, binding contract of sale or title to the residence is otherwise transferred to persons other than the individual or the individual's spouse who qualifies under section 42-17302. A tax deferred residence may not be transferred or conveyed unless the deferred property taxes, interest and costs are paid in full.

3. The residence is no longer the residence of the individual and, in the case of a married individual, the individual's spouse who qualifies under section 42-17302, unless the individual or spouse is required to be absent from the residence due to illness.

4. The residence becomes income producing property.

A.R.S. § 42-17311(A)(1)-(A)(4)

The Maricopa County Assessor has a useful section on it's website on how seniors to take advantage of this law.

This brief overview of some important considerations associated with Arizona property tax exemption and deferral is by no means comprehensive. Always seek the advice of a competent professional when making important financial and legal decisions.

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