valuation

ad valorem tax

An ad valorem tax is a tax based on the value of property; the phrase is Latin for "according to value." Local property taxes are the main example, funding schools, police, and other services. The tax is typically calculated by multiplying the assessed value, after any exemptions, by the tax rate, often expressed in mills. Unpaid ad valorem taxes become a specific lien with high priority.

Exam tip
Ad valorem taxes are based on value; special assessments are based on benefit from a specific improvement. Property tax liens usually take priority over mortgages.
Example
A home assessed at $200,000 with a tax rate of 25 mills owes 200,000 x 0.025 = $5,000 in annual ad valorem tax.

Related terms & state variants

Sources

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Last verified: 2026-10-23