Cindy Miller has made a strong impression, and we welcome her to the staff. Here is her second contribution to KNS, a deep dive into Indiana’s Senate Bill 1:
Kevin Keith
Owner and GM KNS Radio
8/28/25
Indiana’s sweeping property-tax overhaul is now law, promising billions in relief for homeowners while forcing local governments and schools to recalibrate their budgets over the next several years.
Gov. Mike Braun signed Senate Enrolled Act 1 on April 15, 2025, capping a months-long push by legislative leaders to slow fast-rising tax bills and “simplify” a system they concede became too complex. The centerpiece: a new, automatic 10% homestead tax credit (capped at $300) beginning with bills payable in 2026, which state fiscal analysts say will reduce homeowners’ taxes by roughly $1.2–$1.4 billion from 2026–2028.
How homeowner bills will change:
- New credits: Every homestead receives an extra 10% credit (up to $300) on the final bill starting in 2026. Additional stackable credits apply to certain groups, including seniors 65+ and disabled veterans (amounts vary by category in the final law). Credits apply even if a homeowner is at the constitutional 1% cap.
- Homestead deduction reshuffle: Indiana will phase out the fixed “standard” homestead deduction by 2030 (currently up to $48,000) and phase up the “supplemental” homestead deduction over several years, topping out at 66.7% of homestead assessed value by 2031. Lawmakers say the shift better tracks market values and yields steadier bills.
What it means for local budgets and schools
Statehouse leaders framed SEA 1 as homeowner relief; local officials warn the savings come with trade-offs. A nonpartisan fiscal analysis cited by lawmakers projected about $1.5 billion less in local-unit revenue over three years, roughly half borne by school corporations. Cities, counties, and school districts will still see revenues grow in many cases — just not as much as under prior law. Some communities are already proposing trims; Indianapolis, for example, has outlined reductions tied to the new cuts.
Renters aren’t directly covered. Because the relief targets homesteads, tenant advocates argue landlords may not pass on any savings from reduced non-homestead taxes. Lawmakers also folded school policy into the final package, including a requirement that districts share certain property-tax revenue with charter schools, intensifying debate over district budgets.
The income-tax lever (and new guardrails)
To give cities and counties a replacement tool, SEA 1 cuts the overall Local Income Tax (LIT) cap from 3.75% to 2.9% but, for the first time, lets municipalities impose up to 1.2% of that total directly (within the county cap). Supporters say the shift gives communities flexibility; critics say it nudges locals toward income-tax hikes or service cuts to balance books. The law also moves all local referenda to general-election years and adds a Property Tax Transparency Portal for side-by-side bill comparisons.
Business personal property and a follow-up fix
SEA 1 also overhauls business personal property (BPP) taxes by eliminating the long-standing 30% depreciation “floor” for new equipment placed in service after Jan. 1, 2025, and by raising the small-business BPP exemption to $2 million beginning with the 2026 assessment. A subsequent clean-up bill, HEA 1427, repealed an interim $1 million exemption for 2025 and ordered amended returns for businesses that filed early under the short-lived provision.
Timeline and what to watch
- 2025: Law signed; agencies begin guidance and portal build-out.
- Pay 2026 bills: 10%/$300 homeowner credit starts; first steps in homestead deduction shift; local budget planning reflects lower property-tax growth.
- 2026–2031: Deduction phase-down/phase-up continues; communities decide whether to use the new municipal LIT authority; schools and local governments adapt to new referendum timing and debt-limit rules.
Bottom line
For most Hoosier homeowners, 2026 bills should be lower than 2025 under SEA 1. But the relief shifts pressure onto local budgets, especially schools, and moves more of the funding conversation to local income taxes and referenda. Expect intense county- and city-level debates this fall as budget writers weigh whether to trim services, tap the new municipal LIT, or both.