Property Tax Updates in Arizona

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January 24, 2013 — 1,507 views  
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Arizona voters from November 2012 have a chance to pass state constitutional amendment which made fundamental changes to Arizona property tax. The ballot measure, which is called Proposition 117, limits the increase in annual real property value to 5 percent of the previous year's value.

Currently, to calculate property tax, Arizona uses a "Two Track" system. The secondary taxes are usually based on a property's full cash value percentage (market value estimate) while "primary taxes" are calculated on a property's limited value. The limited value is not higher than full cash value. The limited value is made to set to the previous year's value plus one quarter or 10% of the difference between the limited value of previous year and the full cash value of the current year, whichever is higher.

When the property values fall or are stable, the full cash and limited values are often similar. But when value of the property increases rapidly, the full cash value becomes significantly higher than the limited value.

If Proposition 117 is passed, it will eliminate the "Two Track" system of Arizona. Real values of the property will be set to 5 percent higher than the full cash value or the previous year's value, whichever is lesser. The cap will not be applicable to new properties (those that are combined, split, or redrawn), properties having new construction, or properties with changes.

It has to be noted that Proposition 117 is merely a value cap and not a tax cap. Taxing authorities will retain rights to raise taxation rates to meet perceived or real budgetary needs. Although supporters claim that the taxes will stabilize, it will depend mainly on the taxing authorities. If Proposition 117 is passed, it would come into effect for the tax year 2015.

More about Proposition 117

Some advocates say Proposition 117 which was originally sponsored by R-Chandler and Sen. Steve Yarbrough, would allow the required simplification on the property tax system of the state, which is one of the most complicated in this nation, and bring down the burden on tax.

However, the critics find Proposition 117 to be misleading. Although, ballot measure caps the growth valuation at 5% per year, critics argue that nothing is done to limit increase in tax rate. Opponents say that the taxing districts shall decide on how much is needed to spend.

Computing the Property tax of Arizona

It is hard to say what your real estate tax will be, as that depends on the location. Schools, cities, water community colleges, districts, and bond issues – all determine the particular tax rate. The tax rate that is applicable to every parcel of the property is the total of the county, state, special district, school, and municipal rates.

The average tax rate on homes in Arizona, without rebates and exemptions, is about 10 percent of assessed value or 1 percent of market value. So, if an assessment is done on your house for a full cash value of $350,000, and if the tax rate of your property is calculated as 1 percent of the value, then you will be paying about $3,500 per annum for real estate tax on your house.

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