Ad valorem tax

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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 revenues for state and municipal governments.

An ad-valorem tax is typically imposed at the time of a transaction (a sales tax or value-added tax (VAT)) but it may be imposed on an annual basis (property tax) or in connection with another significant event (inheritance tax or tariffs). The alternative to ad-valorem taxation is a fixed-rate tax, where the tax base is the quantity of something, regardless of its price: for example, in the United Kingdom, a tax is collected on the sale of alcoholic drinks that is calculated on the quantity of alcohol contained rather than the price of the drink.

Ad-valorem taxes are important to customs brokers importing goods into the United States of America.

Ad-valorem can also be assesed on other property, such as cars for example, as is the case in the state of Georgia.

Ad-valorem is used frequently to refer to property values by County Tax Asessors. The Central Appraisal District (CAD) sends certified values ad-valorem to the County Tax Asessor who determines the final tax rate to be imposed on the property.

Ad valorem is Latin for "According to value".

See also: Tax

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