Tax Breaks for Homeowners in Phoenix

Tax Breaks for Homeowners in Phoenix

After concerns last fall that property tax cuts for commercial businesses would cause residential taxes to rise, Phoenix residents may be looking for ways to reduce their tax burden in 2016.

The good news is that Proposition 117, a measure that passed in 2012 that took effect last year, guarantees that your property taxes won’t rise more than five percent in a given year. The Phoenix market is expanding quickly and assessed home values increased by 25 percent in 2015, but due to Prop 117 homeowners won’t be feeling that crunch all at once.

Still, you want to use any advantage you can. Here are some federal, state, and local homeowner tax breaks you may be eligible for.

Residential Energy Efficient Property Credit

If you’ve been thinking about replacing or upgrading your heating and air system or water heater, the residential energy efficient credit can cover 30 percent of your expenses. This credit applies to the purchase of certain energy-efficient products such as geothermal heat pumps, fuel cell systems, and solar installations.

To learn more about this program and research the specific requirements, check out the IRS overview page, and read this article.

Home Improvement Loan Interest Deduction

But if your renovation plans lean more towards a new kitchen or a bath remodel instead of a new heat pump, you can still reap the tax benefits. That’s because the IRS lets homeowners deduct the interest on home improvement loans up to $100,000. The same is true if you apply for a home equity credit line.

For more information about this deduction and other benefits of being a homeowner in Phoenix, check out the IRS Tax Information for Homeowners page.

Senior Valuation Protection

In Maricopa County seniors 65 and older may qualify for the Senior Valuation Protection program to reduce homeowner property taxes. Maricopa County includes the cities of Phoenix, Mesa, and Glendale. To qualify, the property must have been your primary residence for at least the past two years and you must meet certain income requirements.

Credit to Aid State Education

If you are an Arizona homeowner, your primary residence is eligible for a state-funded rebate on primary school district taxes if your property tax rate exceeds more than one percent of the value of your property. This may sound confusing, but the good news is that this credit, often referred to as the “homeowner rebate”, is deducted automatically from your tax bill.

Visit the State Board of Equalization website for more information about state tax rates and how this credit is calculated.

Even though the tax season just ended, it’s not too soon to start thinking about next year. Whether you are planning to move to Phoenix, turning in your apartment keys and buying your first home in the county, or planning a major home renovation in the next year, understanding the tax advantages of homeownership can help you save money and plan for a secure future.

*Updated June 2020.