Full Cash Value vs Limited Property Value: what's the difference?

Your Arizona property carries two different numbers, and they move differently. Full Cash Value (FCV) is the assessor's estimate of what the property is worth on the market. Limited Property Value (LPV) is a separate, capped number, and it is the one your property taxes are actually calculated on. The Arizona Department of Revenue defines Full Cash Value as the figure that "is synonymous with market value," so it can rise or fall with the housing market each year. Limited Property Value is held on a leash: under A.R.S. 42-13301, it can climb only 5% a year, and it can never exceed the Full Cash Value. In most years your taxable LPV sits well below your FCV, which is exactly the protection Arizona voters built into the system.

Every parcel in Arizona carries both numbers on its assessment. Understanding which one you are looking at tells you whether you are seeing a market estimate or the figure that drives your bill. Below is what each value is, why they diverge, how the cap works, and the one event that snaps them back together.

Full Cash Value is the market estimate

Full Cash Value is the assessor's annual estimate of your property's market value, and it is the value you can appeal. The Department of Revenue states that Full Cash Value "is synonymous with market value which means the estimate of value that is derived annually by using standard appraisal methods and techniques." In plain terms, the assessor asks what your home would sell for, using sales of comparable homes, the cost to rebuild, and other standard methods. The statute also caps it: Full Cash Value "shall not be greater than market value," no matter what method produces it.

Because FCV tracks the market, it moves. In a hot year it climbs. In a downturn it can fall. It is recalculated annually. That movement is normal, and on its own it does not set your tax bill. What FCV does control is your right to appeal. The Department notes that the FCV is "the value appealable by the property owner." So if you think your assessment is too high, the FCV is the number you challenge, not the LPV.

FCV also feeds the LPV. The cap on your taxable value is expressed relative to the FCV, and a few specific events reset the LPV directly to a share of the FCV. So even though you are taxed on the LPV, the FCV is the anchor underneath it. Keeping the FCV honest is how you keep the LPV honest.

Limited Property Value is what you are taxed on

Limited Property Value is the capped figure that your actual property taxes are calculated from, and it can rise only 5% in a normal year. The Department of Revenue defines the LPV as the value "used... for assessing, fixing, determining and levying primary and secondary property taxes." That is the operational difference. The FCV is an estimate. The LPV is the working number that, after an assessment ratio and the local tax rate, becomes your bill.

The cap came from voters. The Department explains that Arizona's Proposition 117, approved in 2012, "imposed a limitation of the LPV's annual growth to 5% beginning in tax year 2015." The mechanism is called Rule A: the Department describes it as "the preceding valuation year LPV of the property plus five percent of that value," under A.R.S. 42-13301(A). One more guardrail applies. The statute states the LPV "shall not exceed its current full cash value." So the LPV rises slowly and stops at the FCV ceiling.

For a primary residence, the county applies a 10% assessment ratio to the LPV to get the assessed value, then applies the combined local tax rates. That is why two homes with the same market value in different cities can owe different amounts. The rates differ by city and district across Maricopa and Pinal County.

Why the two values drift apart

FCV and LPV drift apart because one chases the market and the other is capped. In a rising market, the assessor's FCV can jump 10% or 15% in a strong year, but your LPV is allowed to move only 5%. Each year the market outruns the cap, the gap widens. After several hot years, it is common for a home's taxable LPV to sit far below its market FCV. That gap is the cap doing its job. It shields you from a tax spike just because the neighborhood got expensive.

The drift also means the headline market value on your notice can look alarming while your actual taxable value barely moved. Reading the right line keeps you from panicking over the wrong number. The FCV line tells you what the assessor thinks your home is worth. The LPV line tells you what you will be taxed on. When the FCV climbs but the LPV ticks up only its 5%, your bill follows the LPV, not the scary FCV.

There is a floor on the gap, though. The LPV can never pass the FCV. In a falling market, if the FCV drops below where the capped LPV would land, the LPV is pulled down to the FCV. So the cap protects you on the way up and the FCV ceiling protects you on the way down.

A simple example shows the spread. Say your home's FCV is $500,000 and your capped LPV is $360,000 after years of slow 5% growth. Your taxes are figured on the $360,000, not the $500,000. If the market pushes the FCV to $560,000 next year, your LPV can still rise only 5%, to about $378,000. The market jumped $60,000, but your taxable value moved only $18,000. The wider that gap grows, the more the cap is saving you each year.

The event that resets both: new construction and splits

The cap is suspended and the LPV is recomputed when a property is new, built on, split, or changed in use, under Rule B. A.R.S. 42-13302 covers these cases, and the Department of Revenue states the LPV is then "established at a level or percentage of FCV that is comparable to that of other properties of the same or similar use or classification." So a new home, a casita, an addition, or a lot split breaks the 5% link for one year and resets the LPV to the comparable ratio, rather than carrying the old capped value forward.

This is why a new build behaves so differently from a home that simply rose in market value. A home you have owned for years keeps its low, capped LPV even as its FCV climbs. A newly built home gets its LPV set fresh under Rule B, in line with comparable finished homes. For the full mechanics, see our pages on what a Rule B reset is, how much your taxes go up after new construction, and whether a casita or addition raises your taxes.

The takeaway for any Arizona owner: read both lines on your Notice of Value. The FCV is the market estimate and the value you appeal. The LPV is the capped figure you are taxed on. The rules, ratios, and rates here are detailed, vary by county and tax year, and can change. Confirm your current figures and any appeal deadline with the Arizona Department of Revenue and your county assessor before you act on a specific number.

The Jematell Homes approach

We build the budget line by line so the number you sign is the number you build to. If you are planning a custom home in Scottsdale, Rio Verde, or the greater Phoenix metro, we are happy to walk through your project.

Sources

• A.R.S. 42-13301 (Limited property value; Rule A 5% increase)
• A.R.S. 42-13302 (Limited property value in cases of omissions and changes; Rule B)
• Arizona Department of Revenue: Limited Property Value (assessment procedures)