Here’s another recent change made by the legislature that has some practical impact, this time on home owners. I was reminded of this one by Hercel Spears, my on-the-ball real estate salesperson in Tempe (who also trains other real estate licensees).

As part of a much larger piece of legislation adopted last year that established the Arizona Commerce Authority, the rules for classifying residences for property tax purposes have been changed, with accompanying new reporting requirements.

Property taxes on residences are subject to a limitation on the amount assessed for school taxes. It’s commonly referred to as a “rebate,” but it’s really a limitation of the amount that would otherwise be charged under a formula for property taxes levied by counties to support the public schools.

In the past a property would qualify for the “rebate” if it was used for residential purposes and was not leased or rented. A residence that was leased or rented was not eligible for the “rebate,” and as a result would have a higher property tax liability. In other words, if a residence was owner-occupied, the “rebate” applied, and the resulting tax was lower.

Under the new rules, a residence will qualify for the “rebate” only if it is used as the primary residence of the owner, or is rented to a relative of the owner and is the relative’s primary residence. All other residences are subject to the higher tax. In other words, second homes, and homes occupied by persons not related to the owner, will apparently be taxed like rentals, meaning they won’t get the benefit of the “rebate.” The difference can be up to $600 annually.

The law that put these changes in place also says that the county assessor is supposed to send to each home owner, starting this year and in every even numbered year from now on, an affidavit on which the home owner must declare, under penalty of perjury, whether the property is the owner’s primary residence or is rented to a relative who uses it as his or her primary residence.

The law isn’t clear about what happens if a relative (or someone else) lives in a house you own without paying any rent (the provision that specifies which properties qualify for the “rebate” talks about the property being “leased or rented” to a relative), but I think that at least if it’s occupied by a relative, it should qualify regardless of whether or not the relative is paying rent. It’s the relationship, not the payment or non-payment of rent, that qualifies it for the “rebate.”

It is less clear to me what happens with a house that is occupied by a non-relative who isn’t paying rent. That probably is not a common situation, I realize, but I’m sure it does happen.

And who qualifies as a relative, you may ask? The legislature made us a list: the owner’s natural or adopted child or a descendant of the owner’s child; a parent or ancestor of a parent; a stepchild or stepparent; a child-in-law or parent-in-law; or a natural or adopted sibling.

So if you get a form from the county assessor (I did not, by the way, and Hercel reports that a number of his clients in Maricopa County didn’t either) asking you questions about whether you own a house somewhere else, where you are registered to vote, the address on your driver license, and similar questions, now you know why. Answer truthfully, of course, but do answer. If you don’t, the county assessor must by law re-classify your property and your tax bill will go up as a result.


“When he arrived in Vienna [from communist Romania], I discovered bubblegum and chocolate. These things were nonexistent in Romania, and I immediately became a capitalist. I was easily bought off.”

Alex Kozinski,
Judge, United States 9th Circuit Court of Appeals
(quoted in a Reason.com interview published July 2006)