A tax based on the value of real estate or personal property. Ad Valorem taxes are not necessarily just on real estate but can be on a variety of items.

In Latin, Ad Valorem means "according to value" and this is exactly how ad valorem taxes are determined.

Property taxes are Ad Valorem and therefore the tax is levied on the presumed value and not the price that may have been paid for the property at the time of its sale.

Bankapedia's Take

A question people often have when first discovering that property taxes are levied using the Ad Valorem method is: If my taxes go up when my home value increases, will my taxes go down when the market drops?

Fair question, especially if you are reading this in 2009 as the market is undergoing a serious correction.

The answer, more than likely, is no. Not to say that it’s not possible, it’s just not likely. The reason is simple, your county most likely has already appropriated an anticipated amount of revenue for the coming fiscal year, and this number is based on your property taxes. Property Taxes are most likely your local government’s greatest source of revenue. You can, however, file an appeal on the basis that the value being used to calculate your taxes is too high. You can hire an appraiser and go through the whole shooting match, but chances are you are going to pay what the government says you are going to pay.