Arizona veterans seek clarity on 2026 property-tax exemption

A retired Army Reserve major is pressing Arizona lawmakers for answers on whether 100% service-connected disabled veterans who applied for a 2026 property-tax exemption can be denied because of household income. The dispute centers on a new law that says qualifying veterans’ primary residences are “fully exempt from taxation,” even as the income test is scheduled to end in 2027.

Why it matters: - Arizona’s new disabled-veteran property-tax exemption could affect whether 100% service-connected veterans get full relief for tax year 2026. - The issue matters because some veterans say they applied on time, submitted VA disability paperwork and still may be blocked by a household-income test. - The outcome could determine whether Arizona treats service-connected disability as the only standard for the exemption or keeps income as a barrier for another year.

What happened: - Major Lori E. Rehfeldt, a retired U.S. Army Reserve major and Arizona homeowner, is asking state lawmakers and officials to clarify how the 2026 exemption will work. - Arizona voters approved Proposition 130 in 2022, giving the Legislature authority to create property-tax exemptions for disabled veterans. - The Legislature passed HB 2792 in 2026, and Gov. Katie Hobbs signed it on Feb. 12, 2026. - HB 2792 says the primary residence of a veteran with a 100% service-connected disability rating from the U.S. Department of Veterans Affairs “is fully exempt from taxation.” - The law applies beginning with tax year 2026 and was enacted as an emergency measure.

The details: - State fiscal data citing the Arizona Department of Veterans’ Services identified 37,970 veterans with a 100% disability rating among 154,083 Arizona veterans with disability ratings. - That figure represents about 24.6% of Arizona veterans with disability ratings. - The state data does not separate veterans with a 100% service-connected disability rating from other veterans with 100% ratings. - HB 2792 keeps a household-income qualification for property-tax exemptions. - Rehfeldt is asking whether that income requirement can limit the full primary-residence exemption for 100% service-connected disabled veterans. - Some veterans read the phrase “is fully exempt from taxation” to mean the new law covered them for tax year 2026. - Veterans who relied on that reading obtained VA documentation, completed Arizona forms and filed within the required window. - Rehfeldt said, “Many 100% service-connected disabled veterans understood the words ‘is fully exempt from taxation’ to mean that they were included.” - Rehfeldt also asked, “What does ‘fully exempt from taxation’ mean if a 100% service-connected disabled veteran can still be denied the exemption because of household income?”

Between the lines: - The legal fight is not just about one tax year. It is about whether Arizona’s new exemption is defined by military service-connected disability or by financial need. - Legislation has been considered to remove the household-income limit for qualifying disabled-veteran exemptions starting in tax year 2027. - That pending change has sharpened the question for 2026 applicants who already filed under the new law. - Rehfeldt argues that a disability rating tied to military service should not depend on household income.

What's next: - Arizona lawmakers and state officials may need to determine whether 100% service-connected disabled veterans who filed on time for 2026 can receive relief. - Rehfeldt is seeking a clear explanation of how the 2026 statute applies to veterans who already submitted required VA documentation. - If the income limit disappears in 2027, Arizona may also face pressure to explain why 2026 applicants were treated differently.

The bottom line: - Arizona wrote a broad promise into HB 2792, but the remaining income test has created uncertainty for veterans who thought the full exemption already applied.