July 16, 2021
What are ad valorem (real property) taxes? Ad Valorem is a Latin word that means “according to value” and thus changes based on the assessed value of a product, service, or asset. It is also the official name for property taxes, sales taxes, and value-added taxes. In our case, we will focus on real property taxes levied by state and municipal governments based on the assessed values of properties. In most cases, you’ll also find that people use ad valorem tax to refer to taxes on real estate and personal property, implying that the two terms may be interchangeable. What is a tax assessment? A tax assessment is a method of determining the value of real estate. Each of the 254 Counties in Texas has a County Appraisal District charged with appraising all real property within its territorial jurisdiction. Real estate is assessed to calculate the amount of tax due on it. Please note that property taxes apply to all types of homes. If your home is on a mortgage, you’re likely parting with some money on property taxes already. Most lenders estimate annual property taxes before assessments and send this to you in your monthly bill. You then put some money aside in your escrow account to pay off these amounts. In your case, you can use your tax assessment to figure out how much money will go into escrow in the coming year. All counties and states levy property taxes though their rates and standards may not be the same. Additionally, factors individual to your property will affect how much you pay in taxes. You thus need to keep up with what applies in your county and how often you’ll need to make payments. Most property owners pay taxes annually.