Affecting residential real estate in the cities of Scottsdale, Phoenix and Paradise Valley – Maricopa County

Arizona Property Taxes can be very confusing for three main reasons:  1.  Arizona property taxes are not levied on the market value of a home but on the assessed value of a home, 2. There are numerous unfamiliar terms in the property tax statements and valuations, and, 3.  Property Taxes are billed and due in arrears.  Review the flow chart and read the FAQ you should get a more clear understanding. 

How are property taxes computed?

The burning question everyone has is naturally related to their property taxes and how much they will be.  Here is the formula:

 Full Cash Value x Assessment Ratio = Assessed Value x Tax Rate = Annual Property Tax

The general tax rate is about 1.3% of Full Cash Value.  For example:  A home with a Full Cash Value of $500,000 will in general have property taxes of approximately $6500.

$500,000 x 10% = $50,000 x 13% = $6,500  which is the same as  1.3% of Full Cash Value

What is the primary tax rate?

Tax rates vary by city and sometimes subdivision.  In general, one can expect to pay about 1.3% of the Full Cash Value as determined by the tax assessor.  The tax rates are set in August of each year and taxes are billed in September.  You can review the all the 2008 tax rates here.   You may look up an address or a parcel number here to see the current property taxes.

What is the meaning of “Full Cash Value” ?

Full Cash Value is the current market value of the land and any improvements as estimated by the County Tax Assessor using computerized standard appraisal methods. This value is used to calculate secondary taxes for budget overrides, voter approved bonds and limited purpose districts.  The Full Cash Value has nothing to do with the sales price of a home but the sales prices are used to determine the Full Cash Value.

What is the meaning of “Limited Property Value”?

Limited Property Value is determined by the State Legislature using a mathematical formula that limits the annual increases. The Limited Property Value is the basis for computing the primary taxes used to provide operational expenses for the state, county, cities and schools shown on your tax statement. The Limited Value cannot be greater than the Full Cash Value.

Overview Chart of Arizona’s Property Tax System

 

What is the “Assessed Value”?

Your property tax is not computed on the Full Cash Value but on the Assessed Value of a property. 

How is the "Assessed Value" determined?

The Assessed Value of each property is determined by multiplying the Full Cash Value by the assessment ratio. Residential homes are assessed at 10% and Vacant Land is assessed at 16%.

What is the "Assessment Ratio"?

The assessment ratio is a percentage based on the property use.  It is applied to the Full Cash Value to determine the assessed value and is set by the State Legislature.  The assessment ratio for an owner occupied residential property is 10%.  For example, if you have an owner occupied residential property with a Full Cash Value of $500,000, the property tax will be based on the assessed value of $50,000 .

When you purchase a property mid year – who pays the property tax?

When you purchase a home mid year, the property taxes will not have been paid (the first property tax bill is not due until October).   Property taxes are prorated to the close of escrow so the Settlement Statement will show a Seller credit to the Buyer for property taxes for the part of the year prior to close of escrow.  This means that the new buyer will be responsible for the entire year’s property taxes when they come due.

When are Property Taxes Billed and Due?

Maricopa County property taxes are confusing because they are billed in September of the year for which they apply. The first tax payment is due Oct 1 and is delinquent on Nov 1. The second tax payment is due March 1 of the following year and is delinquent on May 1. If you fail to pay the first half tax in October but you pay in full by December 31 of that year, then you will not be assessed any interest.

Are there any property tax exemptions?

Yes there are tax exemptions for widows, widowers and totally disabled persons subject to conditions and limitations. Read the Arizona statute.  If you want to file for this exemption, download this form.  

Is Senior assistance available?

Yes, if one owner is at least 65, you may apply to freeze the Full Cash Value of your primary residence. You must have had this property as a primary residence for at least two years prior to application and your income (from all sources and averaging for previous 3 years) cannot exceed $30,576 for a single owner or $38,220 for two or more owners.  Download application. 

In addition, the Elderly Assistance Fund, established in 2007 is available to reduce the property tax of qualified elderly taxpayers. More info here

What is meant by “Real Property”:

Real Property includes land, buildings and other improvements on the property (i.e., swimming pools).

What does “Legal Class” mean?

The Legal Class is determined by the property type or use (i.e., owner occupied residential, residential rental, commercial, vacant land, multi-use).

What are "Special Districts"?

Special districts have a limited purpose such as flood control, fire or irrigation.