Property Tax Glossary
Understand the terminology used in Alabama property tax assessments, bills, and exemptions.
A
Ad Valorem Tax
A tax based on the assessed value of property. The Latin phrase means "according to value." Alabama property taxes are ad valorem taxes—the more your property is worth, the more you pay (though the percentage rate stays the same).
Appraised Value
The estimated market value of your property as determined by the county tax assessor. This is what your property would likely sell for in a fair market transaction. Also called "market value" or "fair market value."
Assessed Value
The portion of your property's appraised value that is subject to taxation. In Alabama, the assessed value for owner-occupied residential property (Class III) is 10% of the appraised value. A $300,000 home has an assessed value of $30,000.
Assessment Rate
The percentage of market value that becomes your assessed value. Alabama uses different rates for different property classes: 10% for owner-occupied residential (Class III), 20% for other residential/commercial (Class II), and 30% for utilities (Class I).
B
Board of Equalization
A county board that hears appeals from property owners who believe their assessment is incorrect. If you disagree with your property's appraised value, you can appeal to this board within a limited timeframe.
C
Class III Property
The property classification for owner-occupied residential real estate in Alabama. Class III properties are assessed at 10% of market value—the lowest rate. This classification is why Alabama homeowners enjoy such low property taxes.
Closing Costs
Fees and expenses paid when finalizing a real estate transaction, separate from the down payment. Includes title insurance, attorney fees, deed tax, recording fees, and prepaid items like property tax and insurance.
County Millage
The portion of your millage rate that funds county government operations and services. This rate varies by county and is added to state, school, and municipal millage to determine your total tax rate.
D
Deed Tax (Transfer Tax)
A state tax paid when real estate changes ownership. Alabama charges $0.50 per $500 of the purchase price. On a $300,000 home, the deed tax would be $300.
Delinquent Taxes
Property taxes that remain unpaid after the December 31 deadline. Delinquent taxes accrue 12% annual interest and may result in a tax lien on your property. Continued non-payment can lead to a tax sale.
E
Effective Tax Rate
The actual percentage of your property's market value paid in taxes. Calculated as (Annual Tax ÷ Market Value) × 100. Alabama's effective rate is approximately 0.41%, among the lowest in the nation.
Exemption
A reduction in assessed value that lowers your property tax. Alabama offers homestead exemptions (H-1 through H-4) for primary residences, with enhanced exemptions for seniors, disabled individuals, and veterans.
F
Fiscal Year
The 12-month period used for tax and budgeting purposes. Alabama's property tax fiscal year runs from October 1 through September 30, which is why taxes become due on October 1.
H
H-1 Exemption
The standard homestead exemption available to all Alabama homeowners who occupy their property as a primary residence. Reduces assessed value by $4,000 for state taxes and $2,000 for county taxes.
H-2 Exemption
An enhanced exemption for homeowners 65+ with income under $12,000, or permanently disabled individuals. Exempts all state taxes and $5,000 of county assessed value.
H-3 Exemption
The most generous exemption, eliminating ALL property taxes (state, county, city) for qualifying seniors 65+ with very low income or permanent total disability.
H-4 Exemption
An exemption for homeowners 65+ with income over $12,000. Exempts state property taxes and provides standard county exemption. Often overlooked but provides meaningful savings for seniors.
Homestead
Your primary residence—the home you live in as your main dwelling. Only your homestead qualifies for homestead exemption. Rental properties, vacation homes, and second homes are not homesteads.
Homestead Exemption
A property tax benefit that reduces the assessed value of your primary residence. Must be applied for (not automatic) at your county Revenue Commission. Different exemption levels exist for different situations.
L
Lien
A legal claim against property for unpaid debts. If you don't pay property taxes, the county places a tax lien on your property, which must be satisfied before you can sell or refinance.
M
Market Value
The price your property would likely sell for in a competitive market between a willing buyer and seller. Also called appraised value or fair market value. This is the starting point for calculating property tax.
Mill
A unit of taxation equal to $1 per $1,000 of assessed value. The name comes from the Latin "millesimum" meaning one-thousandth. If you have 50 mills and $30,000 assessed value, you pay $1,500 in taxes.
Millage Rate
The tax rate expressed in mills (dollars per thousand of assessed value). Your total millage rate combines state, county, school, and municipal mills. Higher millage = higher taxes on the same property value.
Municipal Millage
Additional millage charged by cities and towns to fund municipal services like police, fire, parks, and infrastructure. Only applies to properties within city limits. This is why unincorporated areas often have lower total taxes.
P
Proration
Dividing property tax responsibility between buyer and seller based on ownership dates. At closing, taxes are typically prorated so each party pays for their portion of the year.
R
Reassessment
The process of updating property values to reflect current market conditions. Alabama counties reassess on different schedules, typically every 2-4 years.
Revenue Commission
The county office responsible for property tax assessment, collection, and records in most Alabama counties. This is where you apply for exemptions, appeal assessments, and pay property taxes.
S
School Millage
The portion of your millage rate that funds local public schools. Can be county school district, city school district, or special district millage. Often the largest component of your total millage rate.
Special Assessment
An additional tax for specific improvements that benefit your property, such as new sidewalks, street paving, or sewer connections. Not part of regular millage but may appear on your tax bill.
State Millage
The portion of millage that goes to the state of Alabama, typically 6.5 mills for residential property. This is consistent across all counties.
T
Tax Assessor
The county official (or office) responsible for determining property values. The assessor maintains property records and calculates assessed values based on market conditions and property characteristics.
Tax Lien
A legal claim placed on property for unpaid taxes. Tax liens take priority over most other claims and must be paid before the property can be sold or refinanced.
Tax Sale
A public auction of property to recover unpaid property taxes. After prolonged non-payment, the county can sell your property at a tax sale to collect the delinquent taxes, interest, and fees.
Title Insurance
Insurance that protects against claims or disputes over property ownership. Typically required by lenders and recommended for buyers. Costs approximately 0.5% to 1% of the purchase price.
U
Unincorporated Area
Land that is not within any city or town limits. Properties in unincorporated areas don't pay municipal millage, often resulting in lower total property taxes, but may have fewer services.
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