"Ad valorem" is a Latin term that means "according to the value." Ad valorem taxes are levied on property, with the amount of the tax depends on the appraised or assessed value of the item. State and local governments frequently use ad valorem taxes on real estate and on personal property such as boats and cars to raise revenue. The Internal Revenue Service allows taxpayers to write off ad valorem taxes on their tax returns.
Ad Valorem Deduction Rules
State and local taxes on personal property, such as vehicles, must be ad valorem taxes to be deductible on your federal tax return. Taxes and fees on personal property that aren't based on the item's value are not deductible. For example, when you pay for the license tag for your car, the charges may include both a fee for the tag and an ad valorem tax. Only the ad valorem part can be taken as a deduction. The tax must be assessed and paid during the tax year for which it is claimed. Write-offs for state and local ad valorem taxes are available only if you file IRS Form 1040 and itemize deductions.
Other Deductible Taxes
State and local income taxes and sales taxes are tax deductible on a federal tax return. However, you may deduct only one of these in the same tax year. The IRS also allows you to write off foreign income taxes as well as state, local and foreign non-ad valorem real estate taxes.