For homebuyers searching to purchase a home in Arizona, there are many facts they take into consideration before deciding. School districts, proximity to shopping and other neighborhood amenities are among those considerations. Homebuyers moving from out of state are attracted to our beautiful climate, outdoor activities, sports teams, variety of entertainment choices, and relatively low cost of housing. However, it’s a good idea to understand how Arizona property tax works so that you as a homebuyer can fully understand the financial commitment you’re entering when buying a home. 
Arizona Property Tax Guidelines
While you don’t need to commit property tax descriptions to memory, it’s a good idea to have an overall concept of what Arizona’s property taxes are and what they entail. The Arizona Department of Revenue provide several helpful manuals if you really want to dig deep into such matters, but overall, you simply need to have a clear understanding of what is considered a residential property and how taxes are assessed.
How Homes Are Assessed
In Arizona, assessors use computerized systems to value single family residential property for property tax purposes. To accomplish this, they use both computer assisted appraisals and mass appraisals. Computer assisted appraisals are appraisals done in mass by a computer, which is much more efficient and accurate than individuals handling appraisals for tax purposes. They also leverage mass appraisals, which are essentially the systematic appraisal of groups of properties. Why is it important to understand both? Because both are used when determining Arizona property tax. Mass appraisals are essentially fee appraisals, and both are used to determine overall property tax by determining the value of your home.
How Home Values are Determined in Arizona for Tax Purposes
There are two methods used by Arizona appraisers for placing a value on your home. One is replacement cost minus depreciation, and the other is sales analysis. Replacement cost minus depreciation is just that: the cost to build your property today brand new. It looks at home size, materials used, features, and other construction costs. Then it takes into consideration of what a vacant lot would cost. Together, that’s replacement cost. Depreciation is wear and tear of the home, usually determined by appraisers such as age and damage of the home. They use depreciation tables to determine loss of value, then subtract that from the replacement cost.
Sales analysis basically looks at similar properties in the area to determine the home value. An average price is determined looking at size, age of home, construction and material quality and overall condition, with some consideration given for the home’s individual qualities as well. While both methods are reliable, most single-family homes in Arizona are valued using the sales analysis. You can find out home your home’s value was assessed by contacting your County Assessor’s office but know that you typically won’t have a choice as to how your home is assessed.
Understanding how Property Tax in Arizona is Computed
Now that you understand how homes are assessed and appraised, now you can better understand how property tax in Arizona is computed. First, it’s important to understand that AZ property taxes for owner-occupied residences are based on assessed value, not market value. Homeowners typically believe it’s the market value that drives taxes, but that is incorrect. It’s also important to understand that the property tax rate varies depending on schools, utilities, water districts and bonds, so homeowners need to be aware of what the rate is for their area when purchasing a home. The average tax rate on homes in Arizona before exemptions and rebates usually lands between $12 and $13 per $100 of assessed value. You can find average property tax rates by county on the AZDOR site. The average effective tax rate in the state is 0.77%. If you live in another state or have ever researched property taxes in other states, you’ll quickly realize that ours is well below the national average! Want more specifics on how to calculate your property tax rate? There are several handy AZ property tax calculators out there to get a fair idea.
Why You Should Know Your Property Tax Before Buying
It’s important to understand property tax for several reasons including unanticipated reassessments or rate hikes, supplemental bills in the first year of ownership, and significantly higher taxes in the second and subsequent years of ownership. Homebuyers should contact the local assessor’s office to research their properties to get a full understanding of liability. While property taxes can’t be avoided, understanding how they work and what your anticipated property tax will be makes the buying process that much smoother!
If you are in the market to buy or sell a home in Glendale or any other Phoenix realty and want to know more about the process, give us a call at 623-206-9936. We’ll help you house hunt and find a property which best suits your wants and needs.