Ad valorem tax refers to a levy that is based upon the assessed value of real estate property, or even personal property. This tax is placed on a property every year by the tax collector and can be paid during the ‘tax calendar year’. An ad valorem tax on real estate property is based on the value of the property’s worth, as assessed by an appraiser.
The term itself is Latin for “according to/ at value”. Real property taxes include not only the building of a property, but also the land, structures, and any other fixtures or improvements, disregarding tools, machine equipment, etc… that are existing on the property. An example would be a mechanic’s auto body, the building would be taxable and the land, but not the lift inside the garage, or any other equipment used for the commercial property.
The appraisal of a real estate property can be based on a few different factors. These deal with surveying the value/price of similar property, in terms of a home, within the same town or county. This can help make a judgment in relation to the size of the home and its amenities. The house will also be valued along with any additions or improvements that may increase its value, as well as a fair price for the property given the market status at the time. The term used to determine this is “fair market value” which refers to the price a prospective buyer would be willing to pay for the property, as well as the price that an owner would accept (if there were to be a sale. Lastly, the home can be appraised also based on the cost it would take to rebuild or replace the home entirely in case of a loss.
Ad valorem taxes are usually assessed on the first day of the calendar year (January 1), every year. Once the value is determined by an appraiser, a dollar value is given to the property with is later assessed for taxes. The tax collector/appraiser will also establish an ad valorem millage rate, which is sometimes referred to as a tax rate.
This is the rate of tax per thousand dollars of taxable value. Municipalities sometimes depend on their basis of income on ad valorem property taxes.The property tax can also include other personal property of an owner, and can be set on such accessories as jewelry or larger objects like automobiles. In most places, these will not include household goods, or certain types of personal property.
Once a property has been appraised and taxed, it could be subject to future inspections over time to determine if the value has changed over that property. This can be due to the use of the property at its current state, its current market value in relation to any depreciation or improvements done on the property, as well as the income of the property (if it is a commercial business).