Ad Valorem Tax
What it is:
An ad valorem tax is a property tax levied based on the value of the property in question.
How it works (Example):
Ad valorem (Latin for "according to the value") taxes are levied solely as a percentage of a property's market value without regard to quantity or intrinsic value. For instance, if the market value of a 2,000 square-foot home is $100,000, the ad valorem tax levied will be based solely on the home's $100,000 value, regardless of its relative physical size. Municipal property taxes are an example of an ad valorem tax.