Public Law Monitor

Indiana Property Tax Relief Rates

September 13, 2016

Under Indiana’s new system of local income taxes (“LIT”), local government tax relief to certain property owners will be handled differently in a new component called the “Property Tax Relief Rate”. The changes are part of HEA 1485-2015, the state legislature’s attempt to simplify and clarify local taxes starting January 1, 2017.  (The new chapter governing this component is Indiana Code Chapter 6-3.6-5.)

The property tax relief rate works as a tax on income that is then returned as relief to certain property owners (i.e. residential, commercial, and industrial). Historically many municipalities chose to provide it only to residential property owners and thus call it a “local homestead credit”. Only ten counties in Indiana provide a local homestead credit.

County Name	2016 County Homestead Credit Percentage
Allen	7.0404%
Marion	3.0844%
Miami	2.6280%
Monroe	3.4820%
Perry	2.3328%
Posey	5.4261%
St. Joseph	5.8243%
Spencer	4.4136%
Tippecanoe	3.4022%
Vanderburgh	8.0000%

The property tax relief rate may not exceed 1.25% of the adjusted gross income of local taxpayers.  With the state’s changes to local income taxes, beginning January 1, 2017, the homestead credit and any other type of property tax relief is folded into the property tax relief component of LIT. Although this component is called “property tax relief,” it actually reduces the city’s local income tax amount received and not property tax income. The property tax relief is an itemized reduction shown on eligible resident taxpayers’ county property tax bill.

Joshua Claybourn is counsel with the firm’s Evansville office. He advises clients in matters of business and corporate law, governmental services and public finance.