Determining Ad Valorem Tax values

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Fair market value of the property

Tax assessments for determining ad valorem taxes are calculated as of January 1. The tax is levied as a percentage of the assessed property value, which is also known as the fair market value. The concept of fair market value refers to the estimated price of the property that a willing buyer and a willing seller, who both possess a reasonable knowledge of all facts about the property, would accept without being under any compulsion to buy or sell. The price should be a reasonable one for both parties.

Valuation process

Tax authorities often hire professional appraisers to determine the value of a property. They conduct a routine inspection of the property under consideration as part of the valuation process to calculate the fair market value. Some of the determining factors of fair market value include the cost of the property, comparable market data, property use, projected income from the property and estimated depreciation of the property. If property owners are unsatisfied with the valuation given by the tax authorities, they may file an appeal at the local level, higher agency, or at the tax court.

Paying levied tax

Once the fair value of the property has been determined and the ad valorem tax has been charged, the tax authority sends a notification to the property owner. The amount that a property owner pays is dependent on the classification of the property. Properties may be classified as residential, commercial, agricultural, industrial, etc. The amount of tax charged is also dependent on the state and municipal laws since each government unit enacts its own tax laws.