What Are Ad Valorem Taxes in Texas?

The ad valorem tax in Texas is a tax on tangible personal property and real estate that is determined according to the value of the property. It applies to the property of people and corporations but not to property owned by municipalities or other government entities.

In Latin, ad valorem means ?according to the value.? The ad valorem tax also allows for taxation on intangible property and occupation taxes for people and businesses. The law may exempt personal possessions from taxation if these possessions are not solely used to make income, such as a home or vehicle. However, if the cost of collecting these taxes is greater than the money the government gets back, governments may exempt any personal possessions regardless of whether they are used to generate income.

The Texas ad valorem tax also applies to interests on minerals such oil and gas. Minerals are considered real property and have a subjective value based on fair market value, the value the average consumer would be willing to pay for the mineral in the current market. The state of Texas dictates the method used to determine this value. Each year, the county appraisal districts inform mineral owners of the assessed value, and property owners have the chance to dispute the findings.