Ad Valorem Tax
Ad valorem tax is a property tax based on the market value of property in Alabama on October 1. Ad valorem tax on vehicles is authorized under Section 40-12-253, Code Of Alabama 1975. An ad valorem tax lien attaches to a vehicle when it is first brought into the state by a new resident, or when it is originally sold by a new vehicle dealer. Property tax is an ownership tax and not a usage tax. The tax lien accumulates whether the vehicle is operated on the highway or remains off the highway.
Licensing officials are required to collect all outstanding ad valorem tax due on a vehicle before they register the vehicle (Section 40-12-253a). Licensed dealers and individual sellers must report the previous registration to a buyer to prevent the unnecessary payment of back taxes on a vehicle by the new owner. State law requires the collection of twelve months of back taxes when no registration information is available.
Alabama dealers should provide the buyer a Motor Vehicle Dealer Affidavit For Ad Valorem Exemption. The form is furnished to dealers each year by the Alabama Department of Revenue for presentation to county licensing officials at registration. If the sold vehicle is currently titled in another state, then the title number may be recorded on the Alabama title application.
When an Alabama resident buys a vehicle with an outstanding property tax lien, then the buyer must:
- Pay all property tax that has accrued on the purchased vehicle since it was last registered and any interest and penalties on taxes that are delinquent.
- Transfer the buyer’s current plate to the replacement vehicle or purchase a new plate for the vehicle within twenty (20) calendar days of acquisition.
- Inquire about a property tax credit voucher if a vehicle is sold or transferred prior to the owner’s renewal month. The application (download) is available within one year of the sale or transfer.
The ad valorem tax lien attaches to a new vehicle when it is brought into Alabama by anyone other than a dealer or manufacturer, or when the vehicle is removed from a dealer’s inventory. Beginning January 1, 2016, Code of Alabama, 1975, Section 40-12-253 is amended to no longer defer the collection of property tax for new vehicles that are personally owned or personally leased.
If there are no previous Alabama tax liens outstanding, the tax lien attaches to a used vehicle when it is brought into the state by a non-dealer, or when it is removed from a dealer’s inventory. A tax lien that is attached prior to a used vehicle being brought into a dealer’s inventory remains in effect and must be paid before the vehicle can be registered. When a motor vehicle enters dealer inventory, no new property tax lien will attach until the vehicle is sold from the dealer’s inventory.
LOCAL TAX RATES
Each year the Alabama Department of Revenue provides vehicle values to all licensing officials for use in calculating the ad valorem tax on vehicles. Ad valorem taxes are a product of the assessed value of the vehicle and the ad valorem tax rate in the location where you live or do business. The tax rate is set by the Alabama Legislature and is approved by the voters in each jurisdiction.
Rates of Taxation For Limestone County (as Mills):
|Limestone County (1) (2)||6.5||23.5||30.0|
|Madison (3) (4)||6.5||19.0||46.5||72.0|
(1) In 2006 County School District 1 millage rate of 3.0 mills was continued by special election for renewal in 2005 except for areas within the corporate limits of Huntsville, Decatur, and Madison within Limestone County to comply with Amendment 3, Section 2, of the Constitution of Alabama of 1901. (2) In 2007 county school districts’ 1 and 3 millage rates were increased by 1.5 mills to comply with Amendment 778 of the Constitution of Alabama of 1901 (Act No. 2005-215). (3) In 2009 City of Madison millage rate was increased by 10.5 mills for city residents in Limestone County for a special school district tax to Madison City Schools to comply with Amendment 805 of the Constitution of Alabama of 1901 (Act No. 2007-360). (4) In 2020 City of Madison millage rate was increased by 12 mills for city residents in Madison and Limestone Counties for a special school tax for Madison City Schools to comply with Amendment 373 of the Constitution of Alabama of 1901 (Act No. 2019-88).
The actual assessed value of your vehicle appears on your tag and tax receipt and is estimated on your renewal mail notice. Privately owned (titled owner) passenger automobiles and pickup trucks are assessed at 15% of market value. All other vehicles are assessed at 20% of market value. To determine the market value assigned to your vehicle, divide the assessed value by the assessment rate (15% or 20%), (1500 assessed value divided by .15 = $10,000 market value). Note: If you are paying taxes for less than 12 months, the assessed value will be prorated for the number of months you owe.
Privately owned automobiles or pickup trucks used for personal use and private use are Class IV Property and assessed at 15% of market value.
|Assessed Value:||$1,500||(Your assessed value is shown on your tag and tax receipt or notice)|
|Market Value:||$10,000||($1,500 divided by .15 = $10,000 market value as of 10-1-2016)|
|Ad Valorem Tax:||$60.00||($1,500 assessed value x .040 mills = $60.00 taxes)|
Motor homes, recreational trailers, motorcycles, semi trucks, semi-trailers, utility trailers, and commercial vehicles are Class II Properties and are assessed at 20% of market value.
|Assessed Value:||$2,000||(Your assessed value is shown on your tag and tax receipt or notice)|
|Market Value:||$10,000||($2,000 divided by .20 = $10,000 market value as of 10-1-2016)|
|Ad Valorem Tax:||$80.00||($2,000 assessed value x .040 mills = $80.00 taxes)|