The average homeowner pays just over $2,200 in property taxes every year. Property taxes and surprise expenses can scare potential homeowners away from buying property.
To ease the financial burden taxes can have on homeowners, the homestead tax exemption was created.
But what is a homestead? Do you qualify? Here’s what you need to know about homestead exemptions in Arizona.
What is a Homestead Tax Exemption?
Homestead tax is an exemption for homeowners that makes a percentage of the home’s value not taxable. The term “homestead” comes from the fact that qualifying properties are residential homes occupied the primary owners.
For example, if you have a $300,000 home and your property tax is 1%, you would owe $3,000 every year in property tax. However, if you qualify for a $100,000 homestead exemption, you would only need to pay property taxes on $200,000 of your home’s value. This would drop your annual property taxes to $2,000.
Homestead Tax Exemptions in Arizona
Arizona is one of the 46 states that offers a homestead tax exemption. The goal is to relieve the pressure and burden of property tax on homeowners, to make homeownership more accessible. In Arizona, you can exempt up to $150,000.
However, exemptions are based on the property, not the individual. For example, a married couple that owns a home is seen as a singular entity, not as two separate entities that can both qualify for a property tax discount.
In Arizona, houses, land, condominiums and mobile homes, all qualify for tax exemption. However, you have to actually live in the home. Rental properties do not qualify.
How Arizona Homestead Tax Exemptions are Different Than Other States
Homeowners in Arizona don’t have to do any extra work to qualify for a homestead tax exemption. If your home qualifies for the exemption, the state will automatically provide it to you when you are billed.
In Arizona, the homestead exemption is not applied to a child or spousal support, and the courts will not consider it in their judgment.
In the event of bankruptcy, Arizonans are not allowed to use federal bankruptcy exemptions, they are limited to state-only exemptions.