Indiana's Property Tax Changes

An economist and a local government expert say Hoosiers' individual situations will determine how much they save under Indiana's new property tax overhaul. The bill, signed into law by Governor Mike Braun, lets homeowners claim a tax credit of up to 10% of their total property tax bill, with a maximum savings of $300.

Disabled veterans could claim an additional credit of $250, while older Hoosiers on fixed incomes could claim an extra $150. Paul Helmke, director of the Civic Leaders Center at the IU O'Neill School of Public and Environmental Affairs, said most homeowners will likely qualify for the full $300 or close to it.

However, Ball State University economist professor Michael Hicks isn't so sure. He said the average homeowner could still save between $200 and $300, but the median homeowner might end up saving less than $100.

"Savings are going to accrue to higher-income households, and so it's really not going to be as big a bang for families that own a less-expensive home," Hicks said. "The things that are really going to matter are going to be the assessed valuation of your home and then what other exemptions you have in your home."

Local government officials anticipate raising local income tax, or LIT, rates to make up for lost property tax revenue. The bill caps cumulative LIT rates for each county at 2.9%, down from the current 3.75%. Helmke said inflation and the need to pay public safety salaries will likely drive local governments to raise LIT rates.

"I don't think that you're going to see cities and counties holding back. I think they're going to want to get the full income tax amount that they can, or close to it," Helmke said. "That's going to make the schools the loser, and I think for most of us taxpayers, it's going to be a wash."

Hicks also noted that adjustments to business personal property tax will likely hit homeowners as well. The bill significantly expands two exemptions businesses can claim on capital equipment, such as factory machinery. Larger cities with more manufacturers may see the highest increases in LIT rates.