Understanding Indiana Property Tax

As a nurse, I often had to explain complex, confusing and difficult medical situations to patients and families – understanding property tax reform is no different. I am a fan of “Keeping it Simple” whenever possible. So, I will do my best to keep Indiana Senate Bill 1 (SB1) understandable. SB1 primary goals are to provide property tax relief for homeowners, farmers, and businesses. This legislation is expected to save homeowners $1.3 billion by 2028 and save farmers $116 million through 2027. Now that SB1 has been enacted, many questions remain on how it will affect the each of us and how to deal with the consequences that it may have on our community.

Understanding the Key Provisions of SB1:

• Homeowners: most homeowners will see reduced property taxes, with up to a 10% deduction or a $300 maximum cap per bill. Seniors over the age of 65 with income less than $60,000 single/$70,000 joint can apply for $150 extra deduction and have a 2% cap on the increase each year.

• Farmers: will see reduced property taxes, with expanded homestead deductions and adjusted capitalization rates on farmland will also result in savings in $140 million over three years.

• Business Owners: minimum threshold for filing business property taxes increases from $80,000 to $2 million, exempting most small businesses. It also includes an elimination on 30% floor depreciation for new equipment, further reducing business taxes.

  
  

As a homeowner, my assessed property value went up 39% from 2020 to 2025 with the highest jump of 16.6% from 2023-2024. This dramatic rise in the assessed property value caused property taxes to rise substantially faster than my income. I have talked with many Hoosiers from district 28, and most agree that this sharp rise is painful to their budgets and Indiana needs real solutions to these problems. We also need to understand the ramifications of HB 1 on our communities.  

Fallout of SB1:

• Shift to Local Income Taxes: To offset lost property tax revenue, counties can raise local income tax rates up to 2.9%, and cities/towns up to 1.2% resulting in higher local income taxes (LIT). Workers pay local income taxes, not property owners, and they are far more sensitive to economic cycles. Communities with slower job growth or lower incomes will struggle to raise sufficient revenue, even at higher rates. Others will simply choose not to increase taxes, forcing cuts instead.

• Local Governments: While residents may see lower property tax bills, local town, city and county governments will face reduced revenue. This could impact funding for schools, public safety, infrastructure, and other essential services. Property taxes are not simply another revenue source. They are the primary funding mechanism for local government in Indiana. Police and fire protection, street maintenance, parks, libraries, and much of public education depend on property tax revenue. When those revenues fall, local governments do not gain new efficiencies by default; they lose capacity. Over the next decade, the elimination of the depreciation floor and increased business exemptions could devastate local government budgets in cities with large manufacturing sectors. Certain industries are exempt (oil refineries, petrochemical plants, TIF districts) to mitigate some impacts.

• Business Environment: the rise in the minimum threshold for business property tax filings to $2 million will reduce county revenue and shrink tax base from small businesses and affect funding for infrastructure and community services. This reduction may incentivize businesses not to grow beyond 2 million bases which may discourage growth. Schools in districts with large manufacturing bases may face higher budget shortfalls.

• Impact on Local Schools: Indiana House District 28 includes schools from Hendricks, Boone & Montgomery counties. They may face budget cuts to transportation, and capital projects due to reduced property tax revenue.

DISTRICT 28 SCHOOLS - Amended SB1 Version 2-11-25
County	School corporation	CY 2026	CY 2027	CY 2028
Boone	Western Boone County School Corp	−$228,740	−$439,560	-$597,790
Boone	Lebanon Community School Corp	−$394,800	−$886,720	-$1,365,190
Hendricks	Avon Community School Corp	−$431,830	−$1,409,280	-$2,679,790
Hendricks	Brownsburg Community School Corp	−$225,890	−$562,810	-$1,142,720
Hendricks	Danville Community School Corp	−$243,550	−$491,470	-$681,740
Hendricks	Mill Creek Community School Corp	−$173,290	−$332,570	-$456,230
Hendricks	Northwest Hendricks School Corp	−$287,620	−$663,320	-$1,068,290
Hendricks	Plainfield Community School Corp	−$529,870	−$1,019,680	-$1,410,170
Montgomery	South Montgomery Community School Corp	−$312,580	−$595,800	-$804,790
Montgomery	North Montgomery Community School Corp	−$363,670	−$706,070	-$928,900
Montgomery	Crawfordsville Community School Corp	+$40,710	+$47,910	+$68,710
https://www.wfyi.org/news/articles/senate-bill-1-property-tax-reform-ammended-school-impact

Suggestions going forward:

Indiana HB1 delivers substantial property tax relief but creates significant fiscal challenges for local governments and schools. Communities may have to adapt to these changes in taxes and budgets by raising income taxes and prioritizing essential services. Plus, the long-term effects may be more pronounced in areas with heavy reliance on property taxes from manufacturing. The question is how do we negate these complications while achieving our goals for strong, healthy communities?

Does SB1 fit the problem?

The question we should be asking is - Did SB1 fix the problem? The assessed property taxes values are continuing to go up with gross assessed values for commercial, industrial and residential properties throughout Indiana collectively rising 12% from 2024 to 2025. Will we be talking about the same issue in a few years because we haven’t fixed the problem? We should support legislation on property taxes that would prevent rapid changes in assessed values to prevent cyclic crisis management. This is not a new issue, because property taxes are linked to the assessed home values which fluctuated with the economy. Adding a maximum rate of tax change of 5% would help stabilize the process preventing wide swings in the tax rates that are growing faster than inflation and wages. We should prioritize incremental changes over abrupt tax reductions.

Fostering public engagement

I think it is important to foster more public engagement in Indiana House, District 28. I believe this is essential for building trust, improving decision-making, and promoting collaboration in governance. I am committed to listening, asking better questions and inviting diverse voices into the conversation. Effective engagement increases transparency, gathers local insights, and strengthens support for legislation. I believe it is important to understand how legislation will affect our community before it is signed into law.

Did you know what about the “Transparency Portal”?

HB1 has a property tax transparency portal, which is an online website to help residents understand and track changes to their local property tax rates. Information and education on property taxes have not been widely publicized. I believe that part of a legislator’s job is to inform and engage with their district about policies affecting their lives, and education on property taxes effect on Hoosiers is important. Many seniors don’t understand the “Over 65 Circuit Breaker Credit” senior discount of $150 with a cap of 2% increase over previous year for adjusted gross income $60,000 single & $70,000 for joint/married filings. This announcement has not been well publicized and many Hoosier don’t know that they must file Form 43708 with local county auditor by January 15^th. Many seniors will lose out on the opportunity to get some tax relief because they didn't know about the credit requirements.

Consider Avenues to offset losses in local tax revenues

Indiana closed 2025 fiscal year with $26.4 billion in general revenues, 6.8% above 2024 and 2.5 billion in reserves which is largely attributed to income tax revenue. Property taxes accounted for about 83 percent of local tax revenue, while local income taxes were at 12 percent. We should consider using some of these excess funds to provide grants to schools and local governments to offset losses from property taxes. While it is important to constrain the growth of property taxes, we also need to be creative in finding ways to help lessen the blow that schools, fire, and police services may experience with revenue changes.

If you have suggestions on how we can improve this issue, please send me a message.

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