Property tax in Arizona is a primary revenue source for local governments, school districts, community colleges, and various other public services and capital projects for the state. In the 2017 tax year, districts in Arizona imposed roughly $7.5 billion in property taxes across the state, according to Arizona's revenue department. School districts were the biggest recipient of funds, accounting for 49.1% of the total. County governments accounted for a 19.4% share, followed by community colleges with 11.9% and municipal governments with 8.6%. Special tax districts collected funds for fire departments, health services, libraries, parks, water conservation programs, road improvement projects, flood control and various other voter-approved purposes.

Types of Property Tax in Arizona

Arizona has two types of property tax: primary and secondary property tax. Primary taxes provide funds for the ongoing operation of school districts, counties, municipalities and community colleges. Secondary taxes provide operational funds for all other special tax districts, for debt retirement associated with infrastructure investments and other capital projects, and for school budget overrides. A budget override is a voter-approved method of providing additional funding for a school district or community college beyond the funds it receives from primary taxes.

Property taxes are due in two installments in Arizona — once in October and the other in March of the following year. 

Property Valuation in Arizona

Prior to 2015, Arizona operated a dual valuation system for the calculation of property taxes. In that system, secondary property tax assessments were based on the full cash value (FCV) of a property as determined by the real estate market. Primary property tax assessments, on the other hand, were based on a value known as the limited property value (LPV). The LPV was limited by law in the amount it could increase each year. Consequently, a property's FCV could grow faster than its LPV over time. Newly built properties were assigned LPVs to match the difference between the LPVs and FCVs of similar existing properties in the same county, which promises consistency in the valuations of new and old properties.

In 2012, voters approved a set of property tax reforms that simultaneously ended the use of full cash value for tax assessment, and reduced the annual growth limit for LPVs to a flat rate of 5%. In the new system, which was implemented in 2015, both primary and secondary tax assessments are based on a property's LPV. A property's LPV is subject to an automatic 5% annual increase, with the caveat that the LPV may never exceed the current FCV of the property.

Once the LPV is calculated, the tax assessor then applies the required assessment ratio to calculate the property's assessed value. The assessment ratio is based on property classification. Primary and non-primary residential properties, as well as residential rental properties, have an assessment ratio of 10%. Thus, the assessed value of a residential property may not exceed 10% of its full cash value and may be less, depending on it LPV. To illustrate, a home with a full cash value of $225,000 and an LPV of $200,000 would have an assessed value of $20,000.

Average Property Tax in Arizona

As of 2018, Arizona's effective average rate of 0.77%, according to SmartAsset. The average tax payment in the state was about $1,367, placing it 15th-lowest in the country. At the low end, combined property taxes in Coconino County averaged a median annual payment of $1,438 at a rate of 0.62%. The median home value in that county was $231,300. La Paz County, on the high end, had an effective tax rate of 1.07%. The average annual payment on the median home value of $71,200 was $765 for the year. 

Arizona Property Taxes Compared to Neighboring States

Arizona's effective average tax rate is the highest among its several of its neighboring states. New Mexico is at 0.76%, Utah is at 0.67%, while Colorado is at 0.57%. Arizona is in line with neighboring California at 0.89% and on par with Nevada at 0.77%. The national average, according to SmartAsset, was 1.21%, meaning Arizona is less than the national average. A home worth $250,000 in Arizona would average $2,113 in annual tax payments, compared to $3,028 in tax payments at the national average effective tax rate. 

The Bottom Line

Arizona is one of the most affordable states in the country, landing in 15th place compared to other states. Resident homeowners are charged two types of property taxes, which are combined into one single fee. The state uses property taxes to fund various programs including public and higher education, local, state and county governments, and other services such as fire departments, libraries and parks. 

California Property Tax Guide

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