Ad Valorem (National Content State Definitions)

Ad Valorem Property Tax: (According to Value)

1. Basis of Assessment: Ad valorem property tax is calculated based on a property's assessed value, which the local government's tax assessor typically determines. The assessed value is an estimate of the property's current market value.
2. Rate Calculation: The tax rate is expressed as a percentage of the assessed value. For example, if the tax rate is 2% and a property's assessed value is $100,000, the property tax would be $2,000 ($100,000 x 2%).
3. Purpose: Ad valorem property taxes fund local government services and public infrastructure, such as schools, roads, and public safety. The revenue generated from these taxes helps support the community's needs.
4. Variations: The specific rules and rates for ad valorem property taxes can vary from one jurisdiction to another. Different areas may have different methods for assessing property values and setting tax rates.
5. Exemptions and Deductions: Some jurisdictions offer exemptions or deductions from ad valorem property taxes for specific properties or property owners, for example, senior citizens, disabled individuals, or properties used for agricultural purposes.
6. Payment Frequency: Ad valorem property taxes are typically paid annually or semi-annually. Don't forget property owners are responsible for paying these taxes promptly to avoid penalties and potential liens on their property.
7. Appraisal Process: The assessment process involves having the property appraised to determine its market value. Factors considered in the appraisal may include the property's size, location, condition, and comparable sales in the area.

In summary, ad valorem property taxes are a common form of taxation used to generate revenue for local governments. They are based on a property's assessed value and are typically used to fund essential public services and infrastructure. Real estate professionals must understand how these taxes work, which can significantly impact property ownership and real estate transactions.