Ad Valorem Tax
Definition of 'Ad Valorem Tax'
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".
Investopedia explains '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.