Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation. Laws change over time and you should seek counsel to discuss any specific legal questions.
The Arizona homestead exemption continues to evolve, and the 2025 inflation adjustment brings even more significant changes for homeowners. Following Proposition 209’s change to the homestead exemption laws, homeowners who own property that qualifies as homestead property now enjoy a higher homestead cap—which is currently estimated to exceed $425,000.
If you haven’t reviewed your exemption strategy since our last guide in early 2024, Understanding the Arizona Homestead Act: A Complete Guide for Homeowners, this follow-up is your legal refresher and contains an overview of some key updates in 2025.
What’s New Since the Last Homestead Guide?
As a reminder, following voter approval of Arizona’s Proposition 209 (the Predatory Debt Collection Protection Act), the homestead exemption increased to $400,000 as of December 5, 2022. And because annual cost-of-living adjustments (COLAs) are now baked into the statute, that amount was indexed for inflation starting January 1, 2024, and is currently estimated to exceed $425,000.
That said, in March 2025, the Arizona Court of Appeals, in Michael K. Reilly & Sierra Pipeline, LLC v. Canale, 565 P.3d 1066, 1067 (Ariz. Ct. App. 2025), clarified that the amendment applies prospectively and does not affect “rights and duties” that matured before the Act’s effective date of December 5, 2022. That’s important, and it’s not the only new legal development worth noting.
How Proposition 209 Updated Arizona’s Homestead Exemption
The Updated Cap Only Applies Prospectively
Prop 209 didn’t just boost the homestead exemption; it also triggered automatic annual increases. Every January, the cap adjusts based on the prior August’s Consumer Price Index (CPI).
Keep in mind, however, that the exemption amount a creditor may overcome depends not just on when a judgment was recorded, but whether their right to enforce it had matured before December 5, 2022. As clarified in Reilly v. Canale, a recorded judgment alone does not entitle a creditor to the old $250,000 cap unless they had also initiated enforcement – and obtained a writ of execution – before that date.
Additional Protections from Prop 209
While this article focuses on homesteads, Prop 209 also improved other exemptions:
- Motor vehicle equity: up to $15,000 ($25,000 if disabled)
- Household goods: $15,000
- Bank accounts (non-wage garnishment): now protected up to $5,000
- Wage garnishment: reduced to 10% of disposable income (previously 25%)
These changes affect broader asset protection strategies, especially in bankruptcy or judgment defense.
Filing a Homestead Declaration: Why It Still Matters
Homestead Declaration in Arizona (Updated for 2025)
Even though Arizona’s homestead exemption is automatic, filing a Homestead Declaration still provides clear public notice. While not required, it can help resolve disputes over intent or primary residence, especially in bankruptcy or multi-property scenarios.
Which Properties Actually Qualify for Homestead Protection?
This is where things get a bit tricky. Arizona’s homestead laws don’t apply to everything with a roof.
Eligible Properties:
- Primary residences (single-family homes, condos, townhomes)
- Mobile/manufactured homes permanently affixed to owned land
May Not Be Eligible:
- Motorhomes, RVs, and trailers (unless affixed and recognized as real property)
- Houseboats
- Investment properties or second homes
- Mixed-use properties (unless the residential portion is clearly designated)
Bankruptcy Filings and the Homestead Cap
Arizona Homestead Exemption Bankruptcy Rules May Also Apply
Bankruptcy law brings its own complications and limitations. For example, federal caps may reduce the homestead protection if the home was acquired recently or if the homeowner hasn’t lived in Arizona long enough. This is where a skilled real estate and bankruptcy lawyer makes all the difference.
Homestead Trust Planning in Arizona
Trusts are useful estate planning tools, but in Arizona, you need to proceed carefully. Changing title to your property—especially into a trust or LLC—can affect whether the homestead exemption applies.
Key tips:
- Use caution when titling your primary residence in an LLC, as it may disqualify the property from homestead protection.
- If you’re using a revocable living trust, ensure you are named as both trustee and beneficiary.
Trust strategies can help transfer property, avoid probate, and protect surviving spouses. But without proper legal structuring, they can unintentionally compromise your homestead rights. Always consult experienced real estate and probate counsel before making estate planning decisions that may impact your home.
Divorce, Death & Homestead Implications
Homestead protections aren’t just about bankruptcy or creditors — they can also impact divorce settlements and probate proceedings. Having qualified legal counsel in real estate, bankruptcy, probate, and family law can make all the difference.
Holding property as joint tenants with right of survivorship (JTWROS) can help avoid probate while preserving homestead protections, depending on the circumstances.
Creditor Enforcement & Legal Traps to Avoid
Not all equity is safe. Some liens may reduce or eliminate homestead protection. It is important to consult with qualified counsel to confirm whether a lien might impact the homestead exemption.
Gottlieb Law: Trusted Counsel for Arizona Homeowners
Whether you’re protecting your home in Phoenix, navigating a bankruptcy, or planning your estate, Gottlieb Law is here to help. We understand how Arizona’s evolving homestead laws impact:
- Homestead Exemptions
- Trust & Estate Planning
- Divorce Property Divisions
- Lien Defense
We stay current on every statutory update, CPI adjustment, and case law interpretation so you don’t have to.
Ready to Explore the Homestead Exemption?
Your home is likely your most valuable asset. Don’t leave it exposed.
Whether you’re dealing with judgment creditors, planning for divorce, or preparing for bankruptcy, Gottlieb Law can help you identify risks and create a strategy tailored to your situation.
Call Gottlieb Law today at 602-899-8188 or use our Contact Us page here to schedule your initial consultation.
Gottlieb Law, PLC provides this article for information purposes only and nothing herein creates an attorney-client relationship. You should not take any actions in reliance on any of the information contained herein without consulting with qualified legal counsel first and reading this article is not a proper substitute for seeking legal advice of your specific situation. Laws change over time and you should seek counsel to discuss any specific legal questions.