Ad Valorem

Updated: 29 February 2024

What Does Ad Valorem Mean?

An ad valorem is a tax levied on the assessed value of an item. Its name is, appropriately, Latin for “according to value.” Ad valorem taxes are usually applied to real estate and to personal property, including (in the latter case) duties on goods imported from abroad.

Ad valorem taxes imposed by municipalities are commonly referred to as property taxes and are often an important source of revenue and operating funds for state and municipal governments.

Insuranceopedia Explains Ad Valorem

The taxed amount under an ad valorem scheme is based on the value of the transaction or the property being taxed. For goods, the tax is usually imposed at the time of transaction, as is the case for sales taxes and value-added taxes.

Ad valorem taxes for real estate and personal property, on the other hand, are determined and levied annually. Property taxes are usually levied by local government entities, including counties, school districts, and special purpose districts. Property owners can be taxed by more than one entity.

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