Ad-valorem Tax

A tax on the assessed value of real or personal property. Translated from Latin to mean “according to value”, ad-valorem taxes are based upon the monetary value of the asset or good. Common ad-valorem taxes seen in practice are property taxes, sales taxes, and taxes on import goods. Ad-valorem taxes can be transactional or assessed yearly.

To provide an example, an 8% sales tax is based on the monetary value of the good being purchased, and is transactional based, as it only applies when a good is being bought or sold. Likewise, a 7% property tax in Travis County is based on the monetary value of the land as determined by a government assessor, however, is paid annually.

 

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