What type of tax is based on the assessed value of real estate?

Ad valorem taxes are indeed based on the assessed value of real estate. The term "ad valorem" is derived from Latin, meaning "according to value." This type of tax is typically levied by local governments based on the value of property, which can include land and buildings. The property’s assessed value is determined through an appraisal process, and the tax rate is applied to this value to calculate the amount owed.

Property taxes usually fall under the category of ad valorem taxes, as they directly relate to the value of the property owned. Both terms are often used interchangeably in many contexts. However, while property taxes are a specific type of ad valorem tax focused on real estate, ad valorem can also apply to other types of taxes that are assessed based on value, such as certain taxes on personal property.

Income taxes, on the other hand, are based on an individual's or entity's earnings, while capital gains tax is levied on the profit from the sale of assets or investments. These do not relate to the value assessment of real estate, highlighting why those options do not apply in this context.