Ad Valorem Tax (Property Tax)


The term ad valorem tax refers to a tax that is based on the assessed value of a property, service, or product.   Ad valorem is a Latin phrase which means "according to value," and this type of tax is usually imposed at the time of a transaction.  Common examples of an ad valorem tax include property and sales tax.


Ad valorem taxes are oftentimes the primary source of revenues for state and local governments.  The term can refer to any tax imposed based on the value of the property, service, or product.  An individual or business may be required to pay an ad valorem tax simply by owning an asset.  Alternatively, the tax may be collected when a transaction occurs.  The most common examples of ad valorem taxes include:

  • Property Taxes:  also known as real estate taxes; these are collected by municipal governments on a quarterly basis and the amount of tax owed is based on the assessed value of the property owned.
  • Sales Tax:  collected when a transaction occurs; the amount of tax owed is based on the purchase price of the product or service.  In addition to being an ad valorem tax, sales tax is also classified as a consumption tax.
  • Duties:  collected when certain goods are imported into a country; typically collected at the country's border.  As is the case with sales tax, duties are a one-time ad valorem tax based on the value of the goods imported.

Related Terms

flat tax, progressive tax, expatriation tax, excise tax, tax treaty, Gas Guzzler Tax, FUTA, franchise taxsales tax, regressive tax, marginal tax rate