Major Shifts Coming: Navigating the Shift of Indiana’s New Property Tax Landscape
Indiana homeowners and real estate investors are preparing for significant changes as new property tax laws take effect in 2026. The Indiana Legislature passed comprehensive reforms aimed at providing relief for taxpayers, but these changes also introduce new complexities for property owners and businesses.
Whether you own your home or manage a portfolio of investment properties, understanding these updates is crucial for planning your finances and protecting your assets.
Here is a breakdown of what you need to know about the upcoming changes.
Property Tax Credits for Homeowners
One of the most notable changes coming in 2026 is a new property tax credit for all Indiana homeowners. Starting next year, you will automatically receive a credit equal to 10% of your property tax bill, up to a maximum of $300 annually. This is designed to provide immediate relief for homeowners.
Additionally, the state is phasing in an increase to the supplemental homestead deduction. This deduction reduces the assessed value of your home, ultimately lowering your tax bill. By 2031, the deduction will grow significantly, providing even greater long-term savings for homeowners.
Key Changes for Businesses and Investors
For real estate investors and business owners, the reforms bring about important adjustments to business personal property taxes:
-
-
Increased Exemption Threshold:
- The exemption threshold for business personal property tax is increasing dramatically. Historically, businesses with assets valued at $80,000 or less were exempt. Beginning with the 2026 assessment date, this threshold jumps to $2 million. This change aims to significantly reduce the tax burden for many small and medium-sized businesses.
-
-
-
Elimination of the 30% Depreciation Floor:
- Under prior law, the assessed value of business personal property couldn’t fall below 30% of its original cost. The new law eliminates this “30% floor” for assets placed in service after January 1, 2025. This allows businesses to depreciate equipment more fully, leading to lower property tax bills, though this change has a caveat for properties within certain Tax Increment Financing (TIF) districts.
-
-
-
New Deduction for 2% Cap Properties:
- Properties in the 2% tax cap category (which includes rental homes and some other residential properties) will now be eligible for a new deduction beginning in 2026. This deduction starts at 6% of the assessed value and increases annually until 2031.
-
The Bigger Picture: Potential Revenue Shifts
While these reforms offer clear benefits for taxpayers, it’s important to remember that property taxes fund local government services. To address potential revenue shortfalls for cities and counties, the new laws also allow local governments to potentially increase local income taxes.
The long-term impact of these shifts remains to be seen. While you may see savings on your property taxes, it’s possible that some of these savings could be balanced by rising local income taxes.
Navigating the Changes
The new property tax landscape in Indiana is complex, and the specific impact on your property will depend on your individual circumstances.
Understanding these changes is vital for effective financial planning, whether you are a homeowner or a commercial real estate investor. If you have questions about how these changes affect your residential or commercial real estate purchases, or if you need help navigating the complexities of real estate transactions in Indiana, our team is here to assist you.
Click here for more information on residential and commercial real estate purchases.