What does Ad Valorem mean in the context of real estate taxes?

Ad Valorem is a Latin term that translates to "according to value." In the context of real estate taxes, this means that taxes are levied based on the assessed value of the property. When local governments assess a property, they determine its market value, which is then used to calculate the amount of tax owed by the property owner. This method ensures that property taxes are proportionate to the value of the property, making it a fair way to distribute tax burdens among property owners.

This concept contrasts with other methods of taxation, such as flat-rate taxes that do not take property assessed value into account or taxes based on size or market demand, which do not accurately reflect the worth of the property. By using the assessed value, Ad Valorem taxes align the taxation process with the principle that those with more valuable properties should contribute more to public finances.