Ad Valorem Tax

An ad valorem tax is a type of tax based on the value of an item or property. The term "ad valorem" is Latin for "according to value." For example, when you buy real estate or a vehicle, the tax you pay is calculated as a percentage of the item's assessed value. So, if your home is worth $200,000 and the ad valorem tax rate is 1%, you would pay $2,000 in taxes. This system ensures that taxes reflect the current market value, making it a fair way to generate revenue for local governments and public services.