Arizona Veteran Benefits 2025: Property Tax, Income Tax & Financial Guide
Complete guide to Arizona veteran tax benefits: property tax exemptions, income tax treatment, financial benefits, and money-saving strategies for disabled veterans.
Arizona Veteran Benefits 2025: Property Tax, Income Tax & Financial Guide
Arizona offers solid tax benefits for veterans, particularly for those with service-connected disabilities. If you're a veteran considering Arizona or already living here, understanding these benefits can save you thousands of dollars annually while enjoying desert sunshine and a lower cost of living.
Bottom Line Up Front
Here's what Arizona offers veterans:
- Military retirement pay: 100% exempt from state income tax
- Property tax exemption: Up to $4,748 for disabled veterans (amount prorated by disability rating)
- VA disability pay: Completely tax-free (federal and state)
- Vehicle registration: 100% disabled veterans exempt from license tax and registration fees
- Hunting/fishing: Free licenses for 100% disabled veterans, reduced fees for others
Potential annual savings for a 100% disabled veteran: $5,000-$7,000+ depending on property value, location, and vehicle costs.
Income Tax Treatment for Veterans
Military Retirement Pay - Fully Exempt
Arizona doesn't tax military retirement pay. Period. Since tax year 2021, if you received military retirement or retainer pay from the uniformed services of the United States, you may subtract 100% of the amount you received from your Arizona taxable income.
What this means:
- Retire with $30,000/year military pension? Keep all of it
- Retire with $60,000/year? Still keep every penny
- No age restrictions, no income limits, no phase-outs
Military retirement pay and benefits, including Survivor Benefit Plan payments, are entirely tax-free in Arizona.
VA Disability Compensation - Tax-Free
All VA disability compensation is exempt from federal and state taxation. Whether you receive $171/month for a 10% rating or $3,900+/month for 100% with dependents, you won't pay a dime in taxes on it.
Active Duty Pay
Active-duty pay is also tax-free in Arizona, making the state friendly to stationed service members.
State Tax Rates (For Other Income)
Arizona operates on a flat income tax system:
- Flat rate: 2.5% on all taxable income (as of 2024-2025)
This represents a significant reduction from Arizona's previous graduated tax structure, making it one of the most tax-friendly states overall.
Standard deduction: $13,850 (single), $27,700 (married) for 2025 (follows federal)
Comparison to Neighboring States
| State | Military Retirement | Income Tax Rate | Property Tax Exemption (100%) |
|---|---|---|---|
| Arizona | 100% exempt | 2.5% flat | Up to $4,748 (prorated) |
| Nevada | N/A | No income tax | Limited exemption |
| New Mexico | Partial ($10K-$12K exempt) | 4.9-5.9% | Up to $4K assessed value |
| California | Varies | 1-13.3% | Limited exemption |
| Utah | Partial exemption | 4.65% flat | Varies by county |
Arizona's combination of zero tax on military retirement and low flat tax rate makes it highly competitive, especially compared to California and New Mexico.
Property Tax Exemptions for Veterans
Disabled Veterans - Prorated Exemption
Arizona offers a property tax exemption for disabled veterans, but it's structured differently from states like Alabama that offer full exemptions for 100% disabled veterans.
Maximum exemption for Tax Year 2025: $4,748
How disability rating affects the exemption: The amount is directly proportional to your VA disability percentage.
Real-World Examples
100% Disabled Veteran
- Exemption amount: $4,748 (full exemption)
- Example: Home in Phoenix with assessed value of $200,000
- Property tax rate: 0.64% (Maricopa County average)
- Full property tax without exemption: $1,280
- With $4,748 exemption: Annual savings: ~$4,748
50% Disabled Veteran
- Exemption amount: $2,374 (50% of maximum)
- Same Phoenix home
- Annual savings: ~$2,374
70% Disabled Veteran
- Exemption amount: $3,324 (70% of maximum)
- Same Phoenix home
- Annual savings: ~$3,324
Tucson (Pima County)
- Home value: $300,000
- County property tax rate: ~0.84%
- 100% disabled veteran exemption: Annual savings: ~$4,748
Eligibility Requirements
Disability rating: Any VA disability rating (service-connected or non-service-connected) qualifies for proportional exemption
Residency: Must be Arizona resident
Property value limits: Assessed value cannot exceed $31,347, which corresponds to a limited property value (LPV) of $313,470
Income limits (based on 2024 income for 2025 tax year):
- $38,843 per household maximum
- $46,600 with minor children living in the home
- Do not include: Social Security income, Railroad Retirement income, or Veteran Disability income in the income calculation
Discharge requirement: Honorable discharge from active or reserve component
Application Process and Deadlines
Application period for 2025: January 2 to March 1
Required documents:
- VA disability rating letter from U.S. Department of Veterans Affairs
- DD-214 showing honorable discharge
- Arizona driver's license or state ID
- Property deed or mortgage statement
Where to apply: Your county assessor's office
County assessor offices (major counties):
- Maricopa County: (602) 506-3406
- Pima County: (520) 724-8630
- Pinal County: (520) 866-6361
- Yavapai County: (928) 771-3220
- Coconino County: (928) 679-7960
Processing time: Applications must be filed annually by March 1 for the following tax year.
Important: You must reapply each year. The exemption does not automatically renew.
Vehicle Registration Benefits
100% Disabled Veterans - Full Exemption
If you're rated 100% disabled by the VA (or 60%+ rated but receiving 100% compensation due to unemployability/TDIU), you're exempt from:
- All vehicle license tax
- All registration fees
This applies to one vehicle owned or co-owned by the veteran or unremarried surviving spouse.
Annual savings: $200-$500+ depending on vehicle value and age
Example Savings
$30,000 vehicle in Arizona:
- Vehicle license tax (VLT): ~$400 annually (decreasing over time)
- Registration fee: ~$8-$32
- Total annual savings: ~$400-$450
$50,000 vehicle:
- VLT: ~$650+ annually
- Total annual savings: ~$650+
Purple Heart Recipients
Beginning September 24, 2022, Purple Heart Medal recipients are exempt from both vehicle license tax and registration fees for one vehicle or trailer they own or lease.
VA Financial Aid Vehicle
Veterans who acquired a vehicle with financial aid from the Department of Veterans Affairs (typically through special adaptive equipment grants) are exempt from vehicle license tax and registration fees.
This exemption applies to vehicles purchased through:
- Automobile Allowance (one-time grant of $27,349 in 2025)
- Special Adaptive Equipment grants
Application Process
- Visit your local Arizona Motor Vehicle Division (MVD) office
- Present proof of disability rating (VA letter) or Purple Heart award
- Show proof of residence (Arizona driver's license)
- Complete exemption application
Where to apply: Any Arizona MVD office or authorized third-party provider
Renewal: Exemption continues as long as you maintain eligibility
Other Financial Benefits
Hunting and Fishing Licenses
Arizona offers reduced-cost and free hunting and fishing licenses for disabled veterans:
100% Permanently and Totally Disabled Veterans:
- Complimentary combination hunting and fishing license: FREE
- Must be Arizona resident for at least one year prior to application
Veterans with less than 100% service-connected disability:
- Reduced-fee license: $42 (significant savings from standard $160+ combination licenses)
Purple Heart Recipients:
- Reduced-fee license: $28
Application process: Apply at any Arizona Game and Fish Department office or by mail with proof of VA disability rating.
Important note: Veterans with TDIU (Individual Unemployability) may be excluded from complimentary license but may qualify for reduced-fee licenses. Check with Arizona Game and Fish.
Veteran License Plates
Arizona offers specialized license plates for veterans:
- Disabled Veteran plates
- Purple Heart plates
- Medal of Honor plates
- Pearl Harbor Survivor plates
- POW plates
- Branch-specific plates (Army, Navy, Air Force, Marines, Coast Guard, Space Force)
Fee: $17 of the initial and annual renewal fee goes to a special fund to benefit veterans in Arizona.
Eligibility: Veterans or immediate family members (spouse, parent, child, brother, or sister) of a person issued a Veteran license plate.
State Parks
Arizona offers the Disabled Veteran Lifetime Pass for state parks:
Cost: Free for 100% service-connected disabled veterans
Benefits: Free admission to Arizona State Parks for the veteran and passengers in the same vehicle
Application: Contact Arizona State Parks with proof of 100% disability rating
Sales Tax
Arizona does not offer general sales tax exemptions for veterans on purchases. The combined state and average local sales tax rate is approximately 8.4%.
Financial Impact Analysis
Let's calculate the 20-year financial impact for a 100% disabled veteran retiring in Arizona vs. other states.
Scenario: E-7 Retiree, 20 Years Service, 100% Disabled
Annual income:
- Military retirement: $40,000
- VA disability: $45,000 (100% with dependents)
- Total: $85,000
Home: $350,000 (median for Phoenix metro) Vehicle: $35,000
Arizona Savings Over 20 Years
| Benefit | Annual Savings | 20-Year Total |
|---|---|---|
| Property tax exemption | $4,748 | $94,960 |
| Military retirement (vs 5% state tax) | $2,000 | $40,000 |
| Vehicle registration/VLT | $450 | $9,000 |
| Hunting/fishing license | $160 | $3,200 |
| TOTAL | $7,358 | $147,160 |
Note: This doesn't account for inflation or property value appreciation, which would increase savings over time.
Comparison: Arizona vs. New Mexico
Same scenario, but in New Mexico (which partially exempts military retirement):
| State | Property Tax Savings | Income Tax Savings | Vehicle Savings | Total 20-Year Savings |
|---|---|---|---|---|
| Arizona | $94,960 | $40,000 | $9,000 | $147,160 |
| New Mexico | ~$80,000 | $0 (partial exemption) | Limited | ~$85,000 |
Arizona advantage: $62,160 over 20 years
How to Claim Your Benefits
Step 1: Property Tax Exemption
Timeline: Apply between January 2 and March 1 annually
Required documents:
- VA rating decision letter showing disability percentage
- DD-214 showing honorable discharge
- Arizona driver's license
- Property deed or tax bill
- Income verification (if near limits)
- Completed property tax exemption application
Where to apply: Your county assessor's office
Processing time: Processed for the following tax year
Critical deadline: Must apply by March 1 each year. This is not a one-time application.
Step 2: Vehicle Registration Exemption
Where: Any Arizona MVD office or authorized third-party provider
Documents needed:
- VA rating decision letter showing 100% disability (or Purple Heart award)
- Current vehicle registration or title
- Arizona driver's license
- Application for exemption
For VA-purchased vehicles, also bring:
- VA grant approval letter
- Bill of sale showing VA payment
Step 3: Hunting/Fishing License
Where: Any Arizona Game and Fish Department office or apply by mail
Documents needed:
- VA rating letter
- Proof of Arizona residency for at least one year
- Completed application
Contact: Arizona Game and Fish Department Phone: (602) 942-3000 Website: azgfd.com
Step 4: State Park Pass (100% Disabled)
Where: Apply through Arizona State Parks
Documents needed:
- VA rating letter showing 100% service-connected disability
- Arizona driver's license or ID
Contact: Arizona State Parks Phone: (602) 542-4174
Frequently Asked Questions
Do I need to reapply for the property tax exemption every year?
Yes. Unlike some states, Arizona requires annual applications for the property tax exemption. You must file between January 2 and March 1 each year for the following tax year.
What if I'm rated 90% or 70%?
You still benefit from a prorated property tax exemption:
- 90% rating: $4,273 exemption
- 70% rating: $3,324 exemption
- 50% rating: $2,374 exemption
You also get:
- Zero state income tax on military retirement
- Tax-free VA disability compensation
- Reduced hunting/fishing licenses ($42)
Can I get the property tax exemption if I exceed the income limits?
No. The income limits are strict: $38,843 per household ($46,600 with minor children). However, remember that Social Security, Railroad Retirement, and VA disability compensation do NOT count toward this limit.
Does the property value limit affect most veterans?
The property value limit is generous: assessed value cannot exceed $31,347, corresponding to a limited property value (LPV) of $313,470. In Arizona, assessed value is typically much lower than market value, so a home worth $450,000-$500,000 may still qualify depending on assessment ratios.
What if I'm rated 100% but not Permanent & Total?
The Arizona exemption applies to any 100% disability rating from the VA, whether permanent and total or not. You qualify as long as you maintain the 100% rating.
Can my surviving spouse keep the property tax exemption?
Yes, if unremarried. The property tax exemption and vehicle registration exemption both extend to unremarried surviving spouses of qualifying disabled veterans.
Does TDIU count as 100% for vehicle exemption?
Yes. Arizona law states that veterans rated at 60% or more disabled but receiving compensation at 100% due to unemployability (TDIU) qualify for the vehicle registration exemption.
Are military retirement benefits taxed if I move to Arizona from another state?
No. As long as you establish Arizona residency, all military retirement pay is exempt from state income tax regardless of where you served or previously lived.
Do I need to be retired from the military to get these benefits?
- Property tax exemption: No, only need VA disability rating and meet income/property limits
- Income tax exemption on military retirement: Yes, must be retired
- Vehicle exemption: No, only need 100% disability rating or Purple Heart
- Hunting/fishing: No, only need VA disability rating and one year of Arizona residency
What if my county denies my exemption application?
You have the right to appeal. Contact:
- Arizona Department of Veterans' Services: (602) 255-3373
- County assessor's office (request appeals process)
- Veteran Benefits Counselors: Available through Arizona DVS
Does Arizona tax my TSP or 401(k) withdrawals?
Yes, but at Arizona's low flat rate of 2.5%. Qualified retirement account withdrawals are treated as regular income. However, military retirees coming from higher-tax states will still see significant savings.
Will these benefits affect my federal taxes?
No. Property tax exemptions and state income tax exemptions don't impact your federal tax liability. Military retirement and VA disability compensation remain tax-free at the federal level regardless of state benefits.
What happens if I sell my home and buy another in Arizona?
You'll need to reapply for the exemption at your new property. Since you must apply annually anyway, just ensure you file between January 2 and March 1 for your new property.
Can I claim the exemption on a second home or rental property?
The law references the veteran's residence, suggesting it applies to your primary residence. Check with your county assessor's office for specific guidance.
Key Takeaways
Arizona delivers real financial value for veterans:
- 100% disabled veterans save $7,000+ annually through combined benefits
- All military retirees keep their entire retirement check - no state taxes
- Any disabled veteran gets prorated property tax exemptions and reduced hunting/fishing licenses
- Annual applications required for property tax exemption - mark your calendar for January-March
Combined with Arizona's moderate cost of living (about 6.4% higher than national average, but lower than California or Hawaii), warm climate, and strong veteran community, these benefits make Arizona an attractive retirement destination.
The property tax exemption application requirement can be annoying (must apply every year), but the financial benefits are substantial. If you're 100% P&T and haven't applied yet, do it in January 2025.
Resources
- Arizona Department of Veterans' Services: (602) 255-3373 | dvs.az.gov
- Property Tax Exemption Info: Contact your county assessor's office
- Arizona MVD (Vehicle Registration): azdot.gov/mvd
- Arizona Game & Fish (Hunting/Fishing): (602) 942-3000 | azgfd.com
- State Veterans Benefits Guide: Download PDF
Information current as of January 2025. Tax laws and benefit amounts may change. Verify specific details with your county assessor's office and the Arizona Department of Veterans' Services.