Ad valorem tax
National Real Estate Exam glossary · National Real Estate Exam
Definition
A tax levied 'according to value,' the basis for general real property taxes. The tax owed is the assessed value multiplied by the tax (mill) rate, and an unpaid tax becomes a superior lien on the parcel.
Ad valorem tax in plain English
"Ad valorem" is Latin for "according to value," and it just means a tax where the more your thing is worth, the more you owe — which is how regular property taxes work. The government estimates your property's value (the "assessed value") and multiplies it by a tax rate to get your bill; that rate is often quoted in "mills," where one mill is one-thousandth, so a rate of 20 mills means $20 of tax per $1,000 of value. If you don't pay, that unpaid tax becomes a "superior lien," meaning the government gets paid back before almost anyone else, even ahead of the bank that gave you the mortgage. That priority is exactly why property taxes are so dangerous to ignore.
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