Ad valorem tax: What it is & how to calculate it

by Heart of Virginia Properties 05/08/2022

Latin for "according to value," the term "ad valorem" is common in tax conversations. An ad valorem tax is flexible and dependent on the value of the specific asset, product or service. If you're a property owner, you're paying an ad valorem tax on your property taxes. To better understand how this term is used, here is a short guide to how ad valorem tax is calculated:

How do you find the ad valorem tax value?

Fair market value - Fair market value is usually determined by a real estate agent after a careful examination of the property and local market. Fair market value is based on factors like size, location, features and condition of the home. It can also be affected by the values of similar properties in your neighborhood.

Appraisal value - Appraisal value is found through a professional home appraisal. Appraisers conduct a thorough inspection of your home to make sure it meets specific standards. Things like condition, age and visual appearance all factor into an appraisal value.

Assessed value - Assessed value is calculated by taking the fair market and appraisal values and applying the local tax assessment rate. Assessment rates are different depending on the municipality and can also change.

These different values combine to help you find the ad valorem tax value of a property. In turn, this value affects how much you owe in annual property taxes. Regardless of whether you want to buy, sell or refinance a home, knowing this term can help you better navigate the world of home finances.

Familiarize yourself with the differences between fair market value, appraisal value and assessed value to gain a better understanding of how your property taxes are calculated.

About the Author
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Heart of Virginia Properties

Tammy and Christy are Fredericksburg natives with strong community ties and family values. With 20 plus years’ experience in organizing, nurturing, multitasking, and problem-solving, they find themselves capable of juggling the many hats necessary for a real estate transaction. Most people look for one agent to help them manage the process but with Tammy and Christy, your clients will receive the benefit of 2 working on their behalf. They would love to welcome your referrals into the family.