Protecting What You've Built: Property Taxes, Homestead Protection and Keeping Your Equity

For many homeowners, a house is the single largest store of wealth they'll ever have. Protecting that equity — from runaway taxes, from creditors and from poor planning — is just good stewardship. Arizona offers more protection than many states.

Arizona's Property Tax Protections

Arizona consistently ranks among the states with the lowest property tax burdens on homeowners. Several features keep it that way:

• A 5% cap on taxable value growth. Arizona taxes homes on a 'limited property value' (LPV). Under Proposition 117 (approved by voters in 2012), your LPV can rise no more than 5% a year, no matter how fast the market climbs.
• A 1% cap on primary property taxes. The Arizona Constitution limits combined primary property taxes on a home to 1% of its limited value. Voter-approved bonds and overrides are separate.
• A homeowner rebate on school taxes. Owner-occupied primary residences automatically receive a state-funded reduction on part of the school district tax.
• Low assessment ratio. Owner-occupied homes are assessed at 10% of limited value — lower than rentals and second homes.

When you buy, your home's limited value generally resets close to market value. From then on, the 5% cap protects you from sharp jumps. Make sure your home is classified as your primary residence with the county assessor.

The Senior Valuation Freeze

Arizona residents 65 and older who meet income limits may apply for the Senior Property Valuation Protection Option. If approved, the taxable value of your primary residence is frozen for three years at a time. Ask your county assessor for the current income limits and application window.

Homestead Protection From Creditors

Arizona's homestead exemption shields equity in your primary residence from most creditors. In 2022, voters approved Proposition 209, which raised the base amount to $400,000; it now adjusts annually for inflation — making it one of the stronger homestead protections in the country. It applies to your primary residence and protects equity (not the whole home value), and does not protect against your mortgage, property taxes or certain other liens.

Smart Ways to Protect Your Equity

• Title your home thoughtfully. Arizona is a community property state. How you take title affects what happens at death and divorce.
• Consider a trust. Many Arizona homeowners hold their home in a revocable living trust to avoid probate. A beneficiary deed is another simple option.
• Keep your primary-residence status current with the assessor.
• Appeal if your valuation looks wrong. You receive a Notice of Value each year and have a window to appeal it.
• Avoid over-leveraging. Cash-out refinances and large home-equity lines can erase years of building wealth.

This article is general information, not tax or legal advice. Consult a qualified Arizona tax professional or attorney about your situation.