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Arizona Property Taxes 101

Knowing information about Arizona property taxes is very important to those who wish to move there. You don't want to purchase a house just to find out later that the property taxes are much higher than you previously thought. Like other states, Arizona utilizes three different ways to assess the value of real estate.

  • Market Sales Comparison Approach
  • Cost Approach
  • Income Approach

The Market Sales Comparison Approach works by comparing the property in question to other properties like it that were recently sold in the area. This is a popular way to appraise the value of real estate within a populated area.

When using the Cost Approach, an appraiser will calculate the cost of building a similar home and purchasing a similar size lot according to the market rates for construction services.

The Income Approach is used mostly for commercial and agricultural real estate. Appraisers determine the value of a property by estimating the price a person would pay to acquire the right to the income that the property is capable of earning.

Determining Tax Rates

The value of the real estate determines the amount of taxes that a home or land owner pays. The County Assessor establishes a Full Cash Value for each property within the county. This value is then multiplied by an assessment ratio that the Arizona legislature enacts, which changes from year to year. The resulting number is the assessed valuation, which is then multiplied by a primary and secondary tax rate.

The assessed value can also be called the Limited Property Value (LPV). This assessment value is always less than the full cash value of a home. For example, if you have a home that has an LPV of $300,000 and taxes are based at 10%, your taxes would be charged on the assessed value of $30,000. The actual taxes that you pay are based upon the sum of the primary and secondary taxes. These taxes are based upon the rates set by the state and county municipalities which use the money to pay for government, schools, fire and special district expenses.

Fair Property Assessments Means Lower Tax Rates

Though calculating Arizona property taxes sounds confusing, it is a very fair way to assess taxes. This means that property taxes in many parts of Arizona are much less than other areas of the county. In addition, many districts offer tax breaks for purchasing certain types of property.