Ad Valorem Tax

Definition - What does Ad Valorem Tax mean?

Ad Valorem Tax is a tax based on the value of the subject property.

Testopedia explains Ad Valorem Tax

Ad valorem taxes are another term for property taxes. When a municipality issues a genreal obligation bond that bond is backed by the full faith and credit of the municipality. In other words, voters' tax dollars are used to pay of the bond. Cities and counties get most of their tax revenue from property or ad valorem taxes, whereas states get most of their tax revenue from income tax and sales tax.
The unit of measurement used to calculate ad valorem tax is known as the "mill rate", which is equal to .001. For example: if a property, assessed at $100,000, is being taxed at a rate of 9 mills (.009) the tax payer would owe $900 that year in ad valorem tax.

Connect with us

Testopedia on Linkedin
Testopedia on Linkedin
Tweat www.testopedia.com
"Testopedia" on Twitter


'@Testopedia'
Sign up for Testopedia's Free Newsletter!