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How Alabama Property Tax is Calculated

how is personal property tax calculated

Jonathan Goode Real Estate Agent Marion, AL (334) 247-2005 Contact Profile

How Alabama Property Tax is Calculated

According to the Alabama Department of Revenue. Amendment 373 of Alabama's Constitution, "provides that all real and personal business property will be assessed at 20% of its fair market value". So if your business owns a property that has a fair market value of $100,000, it will be assessed at $20,000 ($100,000 x 0.20= $20,000).

To calculate the annual ad valorem ("according to value") tax, one must multiply the millage rate by the assessed value. For instance, if your business owned some land with a fair market value of $100,000 in Perry County, property taxes would be assessed at $20,000. The millage rate of $0.047 would be multiplied by the $20,000 assessed value for an annual total ad valorem tax liability of $940.

Assessment rates for individual owners can be as low as 10%, depending on the classification of the property. Much rural land in Alabama is Class III. which is defined as "All agricultural, forest and single family, owner occupied residential property, including owner occupied residential manufactured homes located on land owned by the manufactured home owner, and historic buildings and sites".

This means your personal land in the scenario above that had a fair market value of $100,000 would be assessed at 10%, or $10,000. Your ad valorem tax liability would be reduced to only $470. This is extremely cheap compared with other states. has an interactive map that lets you compare the property tax levels by state .

Alabama Timberland Taxes

Alabama timberland has a special tax of

$0.10 per acre. Additionally, property taxes for timberland (agricultural Class III) are calculated on current use values.

Alabama is unique in that tax calculations are made based on the current use of the property and not fair market value. Fair Market Value is defined as "The estimated price at which the property would bring at a fair voluntary sale." Current Use Value is defined as "The value of eligible taxable property based on the use being made of that property on October 1 of any taxable year; provided, that no consideration shall be taken of the prospective value such property might have if it were put to some other possible use."

Allowing rural land taxes to be calculated on Current Use Value and not Market Value saves most landowners considerable money on property tax. This way, you are paying for what your land is actually used for, and not the highest and best use (HBU). Basing taxes on HBU or market value would force many owners to pay substantially more in taxes or sell their land.

Alabama offers some of the best hunting land, farmland, timberland and recreational properties in the nation. West Alabama has some of the highest quality, low-priced land with the lowest property tax rate in the country. If you are interested in buying or selling rural land in Alabama, please contact me to see how I can be helpful.

By Jonathan Goode Real Estate Agent with AlaLandCo (Land for Sale in West Alabama)

Posted on May 28, 2010 09:27 PM



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Category: Taxes

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