What is the definition of Ad Valorem Tax?

Ad Valorem Tax refers specifically to a tax that is levied on real property based on its assessed value. This means that the amount of tax owed is directly proportionate to the value of the property being taxed. The principle behind an Ad Valorem Tax is that individuals or businesses should pay taxes according to the worth of their property holdings, ensuring that taxation is equitable and proportional to the benefits received from local government services.

This type of tax is commonly applied to real estate, including land and buildings, and is an important source of revenue for local governments. By linking the tax amount to property value, Ad Valorem Taxes help ensure that property owners contribute to the funding of municipal services, infrastructure, and community projects, reflecting the actual economic capabilities of the taxpayers based on their property assets.