Does Arizona Have Real Estate Taxes?

TABLE OF CONTENTS

What Are Real Estate Taxes?

Real Estate Taxes in Arizona

When Do You Have to Pay Real Estate Taxes in Arizona?

What Affects the Fair Market Value of Your Property?

What Happens if I Don’t Pay Real Estate Taxes?

Do I Pay Real Estate Taxes When Buying a Property?

Need Assistance Navigating Real Estate Challenges in Arizona? Unbiased Options Can Help!

One of the more mundane aspects of owning property is paying real estate taxes on it every year. Even if you own the property outright, you still must pay taxes on the property’s fair market value.

The taxes vary from state to state, so you need to know how much you owe based on where you live. Fortunately, Arizona residents don’t have a high property tax rate, so they pay less than the national average.

If you’re unsure about real estate taxes and how they work, let’s dive in and find out.

What Are Real Estate Taxes?

Real estate taxes (aka property taxes) are fees levied by local governments to help pay for infrastructure and other government projects. These taxes are collected annually on almost all property in the United States, and while the rates don’t change very often, the specific dollar amount can.

For example, in a high-demand real estate market like Phoenix, homeowners will have to pay more taxes now than they did five years ago. Even though the rate is the same, the value of their homes has increased, meaning they owe more as a result.

It’s also important to note that real estate taxes differ from the taxes and fees you must pay when buying or selling a home. Property taxes only apply to homeowners or property owners, even if they rent the property to others.

Real Estate Taxes in Arizona

Since each county sets its own tax rate, it matters where you live. For example, the effective property tax rate is 0.64 percent if you live in Maricopa County. However, if you’re out in Pinal County, the rate is 0.75 percent. The average property tax rate for the entire state is only 0.51 percent. Nationally, the rate is closer to 0.99 percent, so Arizona residents have it relatively easy.

Although we’re only talking fractions of a percentage point, the differences can be pretty noticeable. For example, the property tax for an $800,000 home in Maricopa County is $5,120 for the year. That same house in Pinal County would incur taxes of $6,000 or a difference of $880 for the year.

You can use an online property tax calculator to determine how much you would owe for your home.

When Do You Have to Pay Real Estate Taxes in Arizona?

Homeowners and property owners in Arizona must pay real estate taxes in two installments every year. The first is due by October 1st of the tax year, and the second is due by March 1st. If owners fail to pay these taxes by November 1st and May 1st (respectively), those payments are considered delinquent and could lead to foreclosures or tax liens.

What Affects the Fair Market Value of Your Property?

Every year, real estate taxes are calculated based on a property’s limited property value (LPV). This value is not necessarily what you would get if you sold your home today but rather what the property would be worth if converted to cash. The LPV is often lower than the fair market value, so you wind up paying a little less than what the home is actually worth if you sell it. Usually, the LPV is set at five percent higher than the year before, but it can’t exceed the full cash value of a home.

Factors that can affect the LPV and fair market value of your home can include the following:

  • Median Home Prices – County tax assessors will look at what other homes are selling for in the area and determine a median home price for the neighborhood.
  • Property Classification – Arizona puts properties into one of nine classifications, including primary residences, commercial, historical, and centrally valued property. Each classification has its own tax percentage, so if your property falls into a different category, it will affect your tax rate.
  • Market Demand – As a rule, the LPV is relatively low to fight against inflationary pricing. For example, in an area where property is in high demand, owners may be able to sell for far more than they would in other situations. However, despite demand being high, it will effectively raise the amount of the full cash value, allowing the LPV to be even higher.

What Happens if I Don’t Pay Real Estate Taxes?

As we mentioned, these taxes are viewed as delinquent if paid after certain dates of the year (November 1st and May 1st). From there, the county tax board will issue interest fees that can amount to 16 percent per year and prorated monthly.

If 13 months pass and you still haven’t paid your property taxes, the county can charge an advertising fee of five percent. At 16 months, the county can issue a tax lien on the home. After three years, the home will likely go into foreclosure.

Do I Pay Real Estate Taxes When Buying a Property?

Yes, you will owe property taxes when purchasing a new home, and you will be responsible for them if you inherit a home. In both cases, the tax amount is still calculated with the same formula, and the bill is due by either October 1st or March 1st, depending on when you bought or inherited the property.

Need Assistance Navigating Real Estate Challenges in Arizona? Unbiased Options Can Help!

Unbiased Options can help you work through the complexity of this process in regard to selling your property. As experts in tricky real estate scenarios, we can provide the best advice on what to do next to avoid hefty fines or legal problems.

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