What does Ad Valorem refer to in relation to property taxes?

Ad Valorem is a Latin term that translates to "according to value," and it refers to a method of taxation based on the assessed value of property. This means that property taxes are calculated as a percentage of the assessed value of the property, which is determined by local assessors based on various factors such as property size, location, and improvements made to the property.

This approach ensures that property taxes are proportional to the value of the property being taxed, thus making it a fair system where individuals pay taxes in correlation to what their property is worth in the market. Consistent assessment practices help to maintain equity within the community regarding the distribution of tax burdens. Other options do not accurately describe Ad Valorem taxes, as they pertain to different aspects of real estate transactions or income taxation.