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.
Check out the Creatures of Statute episode for a primer on Arizona's property tax system.
TAX RATE × TAXABLE VALUE ÷ 100 = TAX LEVY
TAX RATE
Definition: Amount per $100 of NAV that is levied on all property within the jurisdiction.
Determined by: Governing body of the taxing jurisdiction.
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County Board of Supervisors, for county primary and secondary rates.
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Ministerially adopted in August of each year by BOS to administer property taxes for each taxing jurisdiction.
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County BOS has no control over the rate the separate jurisdiction submits.
Limited by:
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1% Constitutional Cap
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For some special districts, statutorily capped rate
TAXABLE VALUE
Definition: Net Assessed Value (NAV) is the value of the property after the assessment ratio and any exemptions are applied.
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Based on limited property value, but for centrally assessed or personal property limited property value and full cash value are the same.
Determined by: County Assessor, Arizona Dept. of Revenue, State Statute
Limited by:
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5% Growth Cap (LAP only)
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LPV cannot exceed FCV
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Senior Valuation Freeze (Owner Occupied Residential only)
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Additional depreciation (Personal Property only)
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Statutory exemptions (Select Categories only)
TAX LEVY
Definition: Revenue collected by the taxing jurisdiction to fund government services.
Determined by: Governing body of the taxing jurisdiction.
Limited by:
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Constitutional Levy Limit (Counties, municipalities & community college districts)
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Homeowners Rebate (Owner Occupied Residential only)
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Debt limits (General Obligation Bond levies only)
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Truth in Taxation (Transparency Requirement)
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:
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real property – land and any permanent structures attached to it, such as homes, office buildings, or commercial warehouses
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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
Levy Limit
Prohibits counties, cities, towns and community college districts from increasing total tax levies more than 2% annually, plus any revenue gained from taxing new construction. These limits can only be temporarily overridden by voters for a maximum of 7 years, and don’t account for increases in costs outside of the county’s control.
1% Cap
Arizona's Constitution limits the amount of primary property tax a residential property owner can pay to 1% of the property's limited value (LPV). This cap applies to the combined primary property taxes levied by all taxing jurisdictions, including counties, municipalities, community colleges, and school districts.
5% Growth Limit
Limits the annual increase in a property’s limited property value (LPV)—the value used to calculate property taxes—to no more than 5% over the previous year. It also required counties to use the LPV, rather than the full cash value (FCV), when calculating both primary and secondary property taxes. This limit applies to most property including residential property, with some exclusions of centrally valued property like mines or utilities.
Senior Valuation Freeze
Provides a property valuation freeze for limited-income seniors who are 65 years or over. The valuation freeze is applicable for three years at a time, and is continued for an unlimited number of three-year terms if the individual continues to qualify.
Debt Limits
Limits the amount of voter approved general obligation debt issued by a county, city, town, school district, or other poltical subdivision to 6% of the jurisdictions NAV. Certain provisions exist for school districts, and cities and towns to increase this limit.
Statutory Limits
Homeowner Rebate
The State of Arizona effectively pays 50% or up to $600 of what a homeowner would pay in primary property taxes to support the basic operational costs of their local school district. This rebate or offset appears automatically on a homeowner’s property tax bill. On the tax bill it is labeled “State Aid to Education.”
Truth in Taxation
Applicable to both primary and secondary property taxes. They require Arizona taxing entities to notify the public and hold a hearing whenever they propose increasing tax levies above the previous year’s level, giving taxpayers a chance to provide input before any increase is approved.
Voter Approval
Requires voter approval for most secondary taxes, which are applied to fund special taxing districts, budget overrides, or general obligation bonds.
Title 42 Exemptions
Title 42, Chapter 11, Article 3 provides numerous property tax exemptions for various qualifying purposes, inluding educational, religious, and non-profit purposes.