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The Ultimate Guide to Arizona Real Estate Taxes

Filing taxes the right way is key to a smooth real estate transaction. How you go about doing that varies state by state. Read on to learn more about property taxes and related regulations in the state of Arizona.
Filing taxes the right way is key to a smooth real estate transaction. How you go about doing that varies state by state. Read on to learn more about property taxes and related regulations in the state of Arizona.

Sorting out your tax obligations can be one of the less exciting parts of buying or selling a home. It is also key to get this step absolutely right so you don’t run afoul of the authorities.

Here’s what homeowners and buyers in Arizona need to know about the taxes that are levied in the state and potential exemptions.

Will You Have to Pay Taxes When You Sell Your Home in Arizona?

Whether or not you pay a tax for selling your Arizona home depends on two things:

  • How much capital you have gained since owning the home
  • How long you have lived on the property

Those who have lived in the house for two out of the five years preceding the sale are eligible for $250,000 in tax-free profits. That number goes up to $500,000 if you are a married couple filing a joint return.

The tax cut is available to anyone selling a primary residence in Arizona who has lived there two of the previous five years. However, you become ineligible if you have already claimed the same exclusion on a different property in the past two years.

How Much Are Real Estate Transfer Taxes in Arizona (and Who Pays Them)?

Real estate transfer tax is the money owed to the government for transferring ownership of property within a particular jurisdiction. The tax amount varies significantly based on the state where your residence is located.

Fortunately for Arizona residents, it is among the 14 states in the country that doesn’t levy a real estate transfer tax. That said, there may still be certain tariffs associated with transferring property in your jurisdiction. Consult a local real estate agent to bring yourself up to speed on exactly what kind of taxes will be involved in the process.

How to Calculate Property Taxes in Arizona

Homeowners in Arizona don’t have to pay transfer taxes, but property taxes, of course, still apply.

The amount that you pay in property taxes is determined based on the assessed value of the property. The assessments are done by the tax assessor in your county. Once the process is complete, the money owed is sent to the county treasurer’s office.

The amount that you pay in property taxes is proportional to the value of your house. The median value of a home in Arizona in 2019 is $193,200. The effective real estate tax rate across the state is 0.72%, which means that the annual tax you’ll owe on a median-priced house comes out to about $1,398.

There is, however, quite a large difference in how much Arizona residents pay in property taxes based on where they stay. Let’s take a look at how much the amounts differ between different counties in the state.

The average tax rate in Maricopa County in Phoenix is 0.802%. On a house that has an assessed value of $250,000, you would pay $2,005 in property taxes annually. Pima County in Tucson has an average tax rate of 1.052%. The same house valued at $250,000 will cost you $2,630 in property taxes every year in Pima County.

Tax Breaks for Arizona Home Buyers & Sellers

Tax Breaks and Credits for Buyers

  • Home Plus Loan: This Arizona Industrial Development Authority program gives creditworthy buyers a 30-year fixed-rate mortgage. In addition to that, down payment assistance worth up to 5% is provided.
  • Senior Property Valuation Protection Program: Those over the age of 65 with an annual income under $36,000 ($45,000 for couples) can apply to have the assessed value of their home frozen for tax purposes. This protects senior citizens from spikes in tax bills resulting from an appreciation in the value of their property.
  • Maricopa County Elderly Assistance Fund: Individuals and couples enrolled in the Senior Property Valuation Protection Program can also qualify for a property tax subsidy. You must be a resident of Maricopa County in order to qualify for this particular tax break.

Tax Breaks and Write-offs for Sellers

  • Home improvement deductions: Any repairs that you can show as being connected to the sale of your residence can be deducted. Repairs are different from home improvements, so make sure to consult with your real estate agent before making a decision.
  • Mortgage interest: The interest that you’ve paid on the mortgage for a house can be considered a deductible. You don’t have to worry about a limit on this unless you owe over $1 million interest.

There are a number of ways in which you can go about getting tax deductions or exemptions. They vary county by county in the state of Arizona and can also depend on your personal profile. Working with a certified tax professional can help you minimize tax exposure.

It also helps to have the guidance of a real estate agent while buying a house in Arizona. Clever Partner Agents set up on-demand showings for buyers so you have a leg up on those who have to wait for a scheduled Open House. Buyers who work with our agents receive a rebate worth $1,000. Enter your zip code on this page to be connected to a top real estate agent in your area.

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Jamie Ayers

Jamie is the Director of Content at Clever Real Estate, the free online service that connects you with top real estate agents and helps you save thousands on commission. In the past, Jamie has managed columns for clients in a variety of leading business publications, including Forbes, Inc., CEO World, Entrepreneur, and more. At Clever, Jamie's primary goal is to provide home sellers, buyers, and investors with the information they need to successfully navigate the ins and outs of the real estate industry.

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