how ad valorem tax works
the latin phrase ad valorem means according to value all ad valorem taxes are levied based on the determined value of the item being taxed in the most common application of ad valorem taxes which are municipal property taxes the real estate of property owners is periodically assessed by a public tax assessor to determine its current value the assessed value of the property is used to compute a tax annually levied on the property owner by a municipality or other government entity 1ad valorem taxes which are based on ownership of a real asset can be looked at in contrast to transactional taxes such as sales taxes while ad valorem taxes are determined and levied annually transactional taxes are only levied at the time of a transaction 