Property taxes in Alabama are based on the ad valorem system, meaning taxes are levied according to the value of the property. Determining the tax involves several steps, beginning with the fair market value of the real or personal property. This value is then multiplied by an assessment rate, which varies depending on the property’s classification. The resulting assessed value is then multiplied by the applicable millage rate (a tax rate expressed as dollars per $1,000 of assessed value) to arrive at the tax owed. For example, if a home is valued at $200,000 and the assessment rate is 10%, the assessed value is $20,000. If the millage rate is 50 mills, the tax would be $1,000.
The significance of this method resides in its ability to provide a consistent and proportional means of funding local government services. These services, such as schools, infrastructure, and public safety, benefit directly from the revenue generated. Historically, reliance on property taxes has been a mainstay of local governance, offering a relatively stable source of income compared to other forms of taxation. The rates and assessment practices are subject to state law and local regulations, ensuring a degree of uniformity while allowing for local variations.
