AssessCheck

Full Cash Value vs Limited Property Value

“My limited property value went up more than 5%” and “my full cash value went down but my value still went up” are the two questions Arizona owners ask most. Both have a precise answer in the statute, and knowing which one applies to you decides whether you have a case at all.

What the statute says the limited property value is

A.R.S. § 42-13301 defines the limited property value in a single sentence: it is the limited property value of the property in the preceding valuation year plus 5% of that value. The next subsection adds the ceiling — the current limited property value may not exceed the current full cash value. The third makes clear that a parcel has one total limited property value: there is no separate limited value for the land and the improvements.

So the 5% is not a promise about your market value, and it is not a cap on the full cash value. Arizona does not limit the full cash value at all. The percentage applies to one figure only: last year’s limited value.

The same rule appears in the state constitution, which is where it came from: Article IX, section 18(3)(b) provides that for taxes levied beginning in Tax Year 2015 the value used is the lesser of the property’s full cash value or an amount 5% greater than the prior year’s value. That matters when you research your own property, because the earlier version of the same subsection used a different mechanism — 10% growth, or the prior value plus one-fourth of the gap to market, whichever was greater. Explanations written before the change still describe that convergence rule as if it applied today. It does not.

Why the limited value can rise while the full cash value falls

Because the formula runs from the prior year’s limited value, and the full cash value is only a ceiling. When the gap between the two has grown large — which happens after several years in which the market rose faster than 5% a year — the limited value keeps climbing at 5% even in a declining market, until it meets the full cash value. County assessors state this explicitly: the limited value can increase even when the current year’s full cash value dropped, and in no case can the limited value exceed the full cash value.

This is not a mistake in your notice. It is the mechanism doing what it was built to do, in the direction nobody advertises.

The complete list of exceptions: when that 5% does not apply

A.R.S. § 42-13302 lists the situations in which the limited property value is instead re-established at a level or percentage of full cash value that is comparable to other property of the same or a similar use or classification. If one of these applies to you, a jump larger than 5% is expected rather than anomalous:

  1. Property that was erroneously omitted from the rolls in the preceding tax year.
  2. A change in physical, objectively verifiable use since the preceding tax year. The statute is precise about what does not count: a change in the occupant or in the classification of a single-family residence is not a change in use in itself. Selling a house to a new owner does not, by itself, re-establish its limited value.
  3. Construction, destruction or demolition since the preceding valuation year, where the total value of the modification is equal to or greater than 15% of the full cash value. This is the threshold that matters most in practice: a project below it does not trigger a re-establishment, and a project at or above it does.
  4. A split, subdivision or consolidation, with the timing rules set out in the same section: property split between January 1 and September 30 of the valuation year is treated differently from property split between October 1 and December 31, and government-initiated actions are treated differently again.
  5. Loss of property valuation protection under Article IX, section 18(7) of the Arizona Constitution — for example, if title passes to a person who does not qualify, or the current owner no longer qualifies or did not reapply.
  6. Loss of a statutory valuation that the property previously qualified for.

Where the limitation does not apply at all

A.R.S. § 42-13304 excludes two categories from the limitation. For both, the full cash value is used for all purposes in lieu of the limited property value:

In other words, a property can be inside the 5% system or outside it depending on what it is, and the notice of valuation is where that shows up.

Worked example (illustrative)

Illustrative figures, with the thresholds applied as the statute states them.

  1. Baseline: prior limited property value $300,000, no change in use and no construction. The new limited value is $315,000.
  2. Same property, with an addition: the owner builds an addition valued at $70,000 against a full cash value of $400,000. That is 17.5% of the full cash value — at or above the 15% threshold — so the limited value is re-established at a level comparable to similar property instead of last year’s figure plus 5%. The arithmetic of the increase is a different exercise, and the result can exceed 5%.
  3. Same property, small project: an addition valued at $50,000 against the same $400,000 full cash value is 12.5% — below the threshold — so the 5% formula still governs the limited value, and the addition still enters the valuation through the full cash value and the assessor’s records.

What this tells you: before treating an LPV increase as an error, check the four practical questions — did the property change use, was there construction, destruction or demolition at or above 15% of the full cash value, was the parcel split or consolidated, and did a valuation protection end.

What it does not tell you: whether your full cash value is correct. That is a market-value question, it has no statutory cap behind it, and it is the question an appeal actually decides.

Why this site does not screen Arizona values yet

The assessment checker published here compares one year’s figure with the previous year’s and flags a change above a state’s threshold. In Arizona that would be wrong twice: the label (an owner holds a full cash value, while “assessed value” in Arizona means the limited value multiplied by the class ratio, a much smaller number), and the logic (a re-established limited value under § 42-13302 lawfully exceeds 5%). An Arizona screen has to take both values and ask the re-establishment questions first, so it is a later phase rather than a checkbox added to a Texas-shaped form.

Where to go next

Sources