On April 15, 2025, Governor Mike Braun signed Senate Bill 1 (SB 1) into law, initiating a sweeping overhaul of Indiana’s property and local income tax systems. Just weeks later, on May 6, 2025, he signed House Bill 1427 (HB 1427), which introduced key revisions and clarifications to SB 1. Together, these bills represent a major shift in how property taxes are assessed and how local governments can generate revenue.

Exemption Thresholds

• Original (SB 1): The exemption threshold was set to increase to $1 million in 2025 and $2 million in 2026.
• Revised (HB 1427): The 2025 increase is repealed, keeping the exemption at its current level for that year. The 2026 increase to $2 million remains in effect.

Minimum Valuation Rule (30% Floor)

• SB 1 introduces a critical change in the minimum valuation rules for personal property assessments. Historically, personal property couldn't fall below 30% of its adjusted cost for tax purposes. The new law removes this minimum valuation for property placed into service after January 1, 2025, unless tied to existing bonds or located within Tax Increment Financing (TIF) areas.

Senior Citizens and Disabled Veterans:

• Original (SB 1): Continued property tax relief tied to Social Security COLA increases, with senior deductions set to expire in 2027.
• Revised (HB 1427): Repeals new local tax credits for veterans introduced in SB 1 and restores the previous property tax deductions that were scheduled to sunset.

Local Income Tax Changes:

• SB 1: The maximum local income tax (LIT) rate a county can impose will increase from 2.5% to 2.9% beginning in 2028.
• SB 1: Cities and towns can impose a municipal LIT rate, up to 1.2% starting in 2028, in addition to county taxes.

Optional Revenue Sharing:

• HB 1427 Revision: Restores previous language regarding optional revenue sharing with charter schools, modifying prior adjustments.

These comprehensive changes underscore the importance for taxpayers, both residential and commercial, to stay informed. Property owners should closely monitor local property assessments and municipal planning activities to understand how these changes specifically impact their communities. For tailored advice, taxpayers are encouraged to consult their Kruggel Lawton tax advisor or the county assessor’s office. Understanding these new rules will ensure you are fully prepared to manage your property and income tax responsibilities effectively in this changing environment.