Gary H. Smith
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What Is Ad Valorem Tax?

By Gary Smith
What Is Ad Valorem Tax?

Property taxes are considered ad valorem taxes. Ad valorem is the Latin phrase for “according to the value.” One important characteristic of an ad valorem tax is that it is proportional to the value of the underlying asset. This is different from a specific tax, where the tax amount remains constant regardless of the underlying asset’s value. 

How Ad Valorem Taxes Work

Unlike transactional taxes—such as a sales tax—which are proportional but charged at the time of a transaction, Ad valorem taxes are calculated on an annual basis. These taxes usually represent a percentage of the fair market value of the underlying asset. In court proceedings involving ad valorem tax, the court usually appoints a tax assessor to determine the value of the asset. The assessed value is used to calculate the proportional tax amount. Most ad valorem tax laws specify the upper percentage of overall limit of tax that a county, state, or other administrative division can charge. Allowances are made for inflation and procedures are established to allow for changes in the tax percentage. 

In Illinois, local government taxing districts include everything from counties, school districts, municipalities, fire districts, park and library districts, sanitary districts, to mosquito abatement districts. Illinois has more local taxing districts than any other state, with nearly 7,000 districts. Illinois does not have a state property tax; instead, property taxes are collected and spent at the local level by the local governing taxing districts.

Appealing Property Taxes

The best way to ensure the property is assessed fairly to yield the correct amount of taxes is to appeal property taxes. First, it should be verified that the information on the property within the tax assessment is accurate. Details such as the correct Property Identification Number (PIN), square footage, the designation of a property, and an accurate listing of bedrooms and bathrooms are important areas of focus when appealing property taxes.  

If any of the above information is incorrect, the property owner can file an appeal. However, this appeal must take place during the town’s designated appeals timeframe. A list of designated appeal timeframes is available on the Cook County Assessor’s website. Property owners should also ensure that the property exemptions for which the property qualifies are taken, as this will also help to lower the property taxes.