Valuation Basis

Since 1980, Arizona has calculated two separate values for each parcel of property: Full Cash Value (FCV), and Limited Property Value (LPV).

  • "Full cash value" for property tax purposes is that value determined as prescribed by statute. If no statutory method is prescribed, full cash value is synonymous with market value which means that estimate of value that is derived annually by the use of standard appraisal methods and techniques. Full cash value shall be used as the basis for the purpose of assessing, fixing, determining and levying secondary property taxes. A.R.S. § 42-11001(5).
  • Limited property value is a value calculated according to a statutory formula, designed to reduce the effect of inflation on property taxes.

Limited property value cannot exceed full cash value, and is calculated on an individual basis for each property. For most personal property, FCV and LPV are the same (mobile homes are the exception). This is also true for most centrally valued properties, with railroads being the only exception.

Types of Tax

Two types of tax are calculated with FCV and LPV, Primary property tax and Secondary property tax.

  • Primary taxes are calculated using limited property value, and are used to pay for basic maintenance and operation of a county, city, or school district.
  • Secondary taxes are calculated using full cash value, and are used to pay for bonded indebtedness of a local jurisdiction, voter approved overrides of tax limits, and taxes levied by special taxing districts.

Calculating LPV

There are two formulas for calculating LPV, called Rule A and Rule B. One or the other is used depending on whether the real property has been assessed previously and whether it has changed in use, size, or improvements within the last year. The chart below shows the questions that should be asked when determining which rule (A or B) to apply.

Rule A and B Questions:

  • Did the parcel exist last year for property tax purposes? Yes or No.
  • Has use of the property changed since last year? Yes or No.
  • Has property been modified by construction or destruction of land or improvements? (Use Rule B: see note.) Yes or No.
  • Has parcel size or identification changed because of a split into two or more properties, or because several parcels have been combined into a single property? (Use Rule A: see note.) Yes or No.

Note: In certain cases an assessor may exercise discretion in application of rule B (refer to assessment procedures manual for details).

Rule A

  1. Calculate 10% of last year's LPV.
  2. Compare last year's LPV with this year's FCV.
  3. Calculate 25% of the difference between last year's LPV and this year's FCV.
  4. Add whichever number is the higher of either step I or step 3 to last year's LPV to arrive at the current year LPV.

Rule B

  1. Identify existing properties of the same use or legal class within the same taxing jurisdiction, and the smallest possible geographic area within the county.
  2. Calculate the ratio of the total FCV to total LPV for all comparable properties.
  3. Apply the resulting ratio to the FCV of the new or modified parcel to obtain the LPV.


Example 1: A parcel which was on the tax roll last year had no changes to improvements or use or size, and whose LPV last year was $80,000. This year, the economy has picked up and the parcel's current FCV is determined to be $100,000.

Rule A is applicable:

$80,000 × 0.10 = $8,000

$100,000 − $80,000 = $20,000

$20,000 × 0.25 = $5,000

$8,000 > $5,000

$80,000 + $8,000 = $88,000

This year's LPV = $88,000

Example 2: A parcel that was not on the roll last year has been created by a developer as part of a subdivision. FCV for the parcel has been calculated at$125,000. Rule B applies in this case, because it has not been previously assessed.

Rule B calculation:

Similar parcels in the same development have been determined to have a ratio of 0.8 for FCV to LPV. Applying the same ratio to the parcel:

$125,000 × 0.8 = $100,000

This year's LPV is $100,000