Purchasing a home in Arizona with a VA loan means you could walk into homeownership with zero money down while accessing state benefits that can add up to significant yearly savings. The combination of federal VA loan advantages and Arizona-specific perks includes property tax exemptions and income tax benefits.
How VA Loans Work
VA-backed purchase loans don't require a down payment as long as you have your full entitlement and the sale price doesn't exceed the appraised value. According to the VA, nearly 90% of VA-backed loans are made with no down payment.
Understanding the VA Funding Fee
Most borrowers pay a one-time VA funding fee at closing. This fee sustains the program without relying on taxpayer dollars. For first-time VA loan users with no down payment, the funding fee is 2.15% of the loan amount. On a $300,000 home with zero down, you'd pay a funding fee of $6,450.
You can reduce this fee by making a down payment. Put down 5% or more, and your funding fee drops to 1.5%. A 10% down payment lowers it to 1.25%. Many borrowers roll the funding fee into their loan amount rather than paying it upfront.
Veterans with service-connected disabilities are exempt from the funding fee. If you receive VA disability compensation, you won't pay this fee. Purple Heart recipients and surviving spouses receiving Dependency and Indemnity Compensation also qualify for exemptions.
Arizona's Property Tax Exemption for Disabled Veterans
Arizona’s property tax exemptions can reduce annual housing costs for disabled Veterans. According to the Maricopa County Assessor's Office, for tax year 2025, the exemption amount is calculated by multiplying $4,748 by your VA disability percentage. A Veteran with a 50% disability rating receives an exemption of $2,374 in assessed value ($4,748 x 50%). A Veteran with a 100% disability rating receives the full $4,748 exemption.
To qualify for Arizona's property tax exemption, your total assessed property value cannot exceed $31,347. Income limits also apply: For the 2025 tax year, income from all sources (excluding Social Security, Railroad Retirement, or VA disability income) cannot exceed $38,843 for households without minor children, or $46,600 with dependents under 18.
The exemption applies to your primary residence first, then can extend to a mobile home or automobile. Veterans must provide documentation including DD214, proof of Arizona residency, a VA Benefit Summary Letter showing disability rating, and proof of income. Applications are filed annually with your county assessor between early January and the end of February.
State Income Tax Benefits for Arizona Veterans
Arizona does not tax active duty military pay, and for military retirement pay, the Arizona Department of Revenue states that beginning with tax year 2021, Veterans who receive benefits, annuities, and pensions as retired or retainer pay of the uniformed services may subtract 100% of the amount received. This means all military retirement pay is exempt from Arizona state income taxes.
National Guard and Reserve members can subtract compensation received for all service, including weekend duty and annual training. Military disability retirement pay received for service-connected disabilities is also non-taxible.
Additional Local Arizona Benefits
Veterans with 100% permanent and total disability ratings receive free hunting and fishing combination licenses. Those with ratings below 100% pay a reduced fee.
Arizona State Parks offer substantial discounts to Veterans. Active-duty service members, Guard members, Reserve members, and resident military retirees receive 50% off day-use passes for themselves and up to three adult family members. Veterans with 100% service-connected disabilities or VA pension recipients can obtain a free All-Parks pass.
The Arizona Tuition Waiver Scholarship Program provides qualifying Veterans and their dependents with free tuition toward a bachelor's degree at state colleges and universities. Purple Heart recipients who were Arizona residents when injured, Veterans medically discharged from the Arizona National Guard, and certain dependents of deceased service members may qualify.
Combining Federal and State Benefits
The benefits multiply when you combine federal VA loan advantages with Arizona's state programs. Consider a disabled Veteran purchasing a $350,000 home with a 70% disability rating. They pay no down payment, avoid the VA funding fee entirely, and qualify for property tax relief. Their military retirement income is exempt from state taxes.
The waived funding fee alone saves over $7,500 upfront. Property tax exemptions continue annually. Tax-free military retirement income adds thousands more in annual savings.
How to Start Your Arizona VA Loan Journey
Begin by obtaining your Certificate of Eligibility through the VA. You can apply online through the VA's eBenefits portal, work through a VA-approved lender, or submit VA Form 26-1880 by mail. Your COE confirms your eligibility and shows your available entitlement.
Research VA-approved lenders operating in Arizona and compare rates and terms. Getting quotes from multiple lenders helps you identify the best terms. If you have a service-connected disability, gather your VA rating documentation before applying to ensure you won't pay the funding fee.
For property tax exemptions, contact your county assessor's office to understand application procedures. Requirements can vary between Arizona counties, and some may have specific forms or deadlines beyond standard state requirements.
Ready to explore how VA loan benefits can help you achieve homeownership in Arizona? Read more about VA loans.
FAQs
Can I use a VA loan to buy a home anywhere in Arizona?
Yes, VA loans work throughout Arizona with no geographic restrictions. VA loan limits no longer cap how much you can borrow with full entitlement, though lenders evaluate your ability to repay based on income and credit.
What if my disability claim is pending when I close on my home?
You'll pay the VA funding fee at closing if your disability rating isn't finalized. However, if your claim is later approved with an effective date before your loan closing, you can request a refund from your VA regional loan center.
Can I use my VA loan benefit more than once in Arizona?
Yes. VA loan benefits are reusable. Once you pay off your previous VA loan and sell the property, your entitlement is restored. You can even have multiple VA loans simultaneously if you have sufficient remaining entitlement.
Do I need perfect credit to qualify for a VA loan in Arizona?
The VA doesn't set a minimum credit score requirement, but most lenders prefer scores of 620 or higher. Some Arizona lenders may work with Veterans who have lower scores if you can demonstrate stable income and manageable debt.
How do Arizona's property tax exemptions work if I move between counties?
You'll need to reapply for the exemption in your new county. Each county assessor administers the program separately, so contact your new county's assessor office during the filing period to maintain benefits.
