Ad Valorem Tax

Loading the player...

What is an 'Ad Valorem Tax'

An ad valorem tax is a tax based on the assessed value of real estate or personal property. Ad valorem taxes can be property tax or even duty on imported items. Property ad valorem taxes are the major source of revenue for state and municipal governments.

Municipal property ad valorem taxes are also known as "property taxes".

BREAKING DOWN 'Ad Valorem Tax'

The phrase ad valorem is Latin for "according to value". In the case of municipal property taxes, property owners have their property assessed on a periodic basis by a public tax assessor. The assessed value of the property is then used to compute an annual tax, which is levied on the owner by his or her municipality. Ad valorem taxes are incurred through ownership of an asset, in contrast to transactional taxes, such as sales taxes, which are incurred only at the time of transaction.

RELATED TERMS
  1. Special Tax Bond

    A type of bond that is repaid by revenues derived from taxation ...
  2. Assessed Value

    The dollar value assigned to a property for purposes of measuring ...
  3. Transfer Tax

    Any kind of tax that is levied on the transfer of official documents ...
  4. Tax Lien Foreclosure

    The sale of a property resulting from the property owner's failure ...
  5. Taxes

    An involuntary fee levied on corporations or individuals that ...
  6. Tax Sale

    The sale of property that results when a taxpayer reaches a certain ...
Related Articles
  1. Taxes

    Your Property Tax Assessment: What Does It Mean?

    Understanding your property taxes can protect you from financial shocks.
  2. Taxes

    The 7 Best States For Property Taxes, and Why

    Understand why some states have high property taxes while others have low property taxes. Learn about the states with the lowest property taxes.
  3. Taxes

    Understanding Excise Taxes

    An excise tax is an indirect levy charged for the sale or use of a particular item.
  4. Taxes

    6 Hidden Government Revenue Streams

    You may be well aware of the tax dollars the government withholds from your paycheck, but this isn't the only way your income is being tapped.
  5. Home & Auto

    This Is How Property Taxes Are Calculated

    Understanding how property taxes work will ensure that you won't be overcharged.
  6. Taxes

    4 Little-Known Ways to Reduce Your Property Taxes

    Property taxes are often expensive and most don't know they can be appealed. Here are little known ways you can try to reduce your property tax liability.
  7. Taxes

    Sell Your Rental Property For A Profit

    Being a landlord can be taxing, especially when you want to sell. Find out how to reduce your burden.
  8. Taxes

    Getting U.S. Tax Deductions On Foreign Real Estate

    If your home or second home is not in the United States, you can still get U.S. tax deductions. How many and what kind depends on whether you also rent it.
  9. Taxes

    The Unseen Taxes That You Pay Every Day

    Taxes are embedded in the price of everything we buy to an extent that most people don't even realize.
  10. Investing

    How Does a Tax-Free Exchange Work?

    In regards to the sale of property, particularly in real estate, a 1031 exchange is increasingly being recognized for its tax benefits to investors of all levels.
RELATED FAQS
  1. How are real estate taxes calculated?

    Find out how real estate taxes are calculated; failure to pay these taxes that can be a substantial annual expense can lead ... Read Answer >>
  2. What are the best and worst states to pay taxes in?

    Explore and compare the wide variations that exist in the overall tax burden imposed by different states, including which ... Read Answer >>
  3. What is the difference between income tax and capital gains tax?

    Understand the difference between a person's income tax and his capital gains tax. Learn when a person needs to pay taxes ... Read Answer >>
  4. Who first came up with the idea of a progressive tax?

    Learn how the progressive income tax system developed in the United States and became the federal government's primary revenue ... Read Answer >>
  5. Where is the best place to invest $400,000 without paying taxes?

    I got $400,000 to take out of profit sharing. ... Read Answer >>
  6. What is the difference between a state income tax and a federal income tax?

    Learn the difference between state income tax and federal income tax based on tax rates, deductions, tax credits and taxable ... Read Answer >>
Hot Definitions
  1. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  2. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  3. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
  4. Over-The-Counter - OTC

    Over-The-Counter (or OTC) is a security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, ...
  5. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis for the reporting of earnings and the paying of dividends.
  6. Weighted Average Cost Of Capital - WACC

    Weighted average cost of capital (WACC) is a calculation of a firm's cost of capital in which each category of capital is ...
Trading Center