Key Point
Arizona ranked very low (48th) in property tax burden in 2023, according to the Tax Foundation - demonstrating that although local governments like schools, counties, and municipalities rely on the property tax to fund essential services, they do so at a lower rate than other states.
Since property tax reform in the 1980s, Arizona has operated with several constitutional and statutory limitations that restrict the amount of property taxes collected, the rate at which they grow, and require transparency when they are increased.
TAX RATE × TAXABLE VALUE ÷ 100 = TAX LEVY
The property tax is collected through a rate set by the governing body of a taxing jurisdiction, the Board of Supervisors for counties, applied to the value of the property within the taxing jurisdiction.
The state constitution, statute and administrative rules govern the assessment and collection of property taxes. In addition to the authority to levy property taxes, there are requirements for assessment, limitations on collections and various exemptions from taxation in both the constitution and state laws.
Key Actors
Elected County Assessors and County Treasurers act as the entities to value and collect property taxes, respectively. In addition to Assessors, the Arizona Department of Revenue (ADOR) assesses certain types of property, like mines and utilities, for property tax purposes. Property assessed by the County Assessor is referred to as Locally Assessed Property (LAP) and property assessed by ADOR is referred to as Centrally Valued Property (CVP).
The state constitution, statute and administrative rules govern the assessment and collection of property taxes. In addition to the authority to levy property taxes, there are requirements for assessment, limitations on collections and various exemptions from taxation in both the constitution and state laws.
Key Terms
Generally, there are two types of property:
-
real property – land and any permanent structures attached to it, such as homes, office buildings, or commercial warehouses
-
personal property – typically moveable improvements on land or things like machinery
These types of property are assessed differently but have the same tax rates applied to them.
In addition to differences between real and personal property, property is also assessed differently based on its current use. These are broken into tax classifications, like commercial property, residential property or agricultural property.
Each tax classification has different assessment ratios which determine how much of the assessed value is taxable. For example, residential property has an assessment ratio of 10%, so a home with a value of $100,000 would have a taxable value of $10,000. That taxable value, after any exemptions are applied, is referred to as the net assessed value (NAV), which is what tax rates are applied to.
The constitution requires that tax rates be applied to the limited property value (LPV), which for most real property (LAP) is generally limited to 5% annual growth. Centrally assessed property and personal property are taxed based on its market value or other statutory framework, referred to as full cash value (FCV), but residential property also has a FCV assigned. In all instances, the LPV cannot exceed the FCV.
LIMITS ON THE PROPERTY TAX IN ARIZONA
Constitutional Limits
Statutory Limits