What are Ad Valorem Taxes?

What are Ad Valorem Taxes?

Ad valorem taxes are taxes based on the assessed value of an item, such as real estate or personal property. The phrase "ad valorem" is Latin for "according to value." These taxes are commonly levied by local governments and are a major source of revenue for municipalities, counties, and school districts.

In the context of real estate, ad valorem taxes are property taxes that homeowners pay annually based on the value of their property. The tax rate, often expressed as a percentage, is applied to the assessed value of the property to calculate the amount owed. This value is typically determined by a public tax assessor.

Ad valorem taxes can also apply to personal property like vehicles or business equipment, depending on local tax laws. The key characteristic of ad valorem taxes is that they fluctuate with the value of the property being taxed; as the value goes up or down, so too does the tax.