On April 15, 2025, Governor Mike Braun signed Senate Bill No. 1 (SB 1) into law, marking a pivotal change in Indiana's property and local income tax regulations. This bill brings significant changes to how property taxes will be calculated and assessed throughout the state. In addition to the property tax measures, there are also local income tax measures to aid localities in capturing additional revenues.

Indiana Property Tax Changes

Exemption Thresholds:

• Effective January 1, 2025, businesses owning personal property (machinery, equipment, etc.) valued up to $1 million will be exempt from property taxes. This threshold will increase to $2 million in 2026, a significant rise from the previous $80,000 limit.

Minimum Valuation Rules:

• 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.

Impact on TIF Districts:

• Property owners in TIF districts can expect more stable tax bills from 2026 through 2033, as the state will adjust base property values annually to neutralize fluctuations caused by changes to tax deductions, including the homestead deduction.

Senior Citizens and Disabled Veterans:

• Senior citizens and disabled veterans will continue receiving property tax relief, but with updated eligibility conditions. The new provisions tie eligibility limits to the annual Social Security cost-of-living adjustments, making it more reflective of economic conditions. While senior deductions will expire in January 2027, property owners eligible under current guidelines should reassess their statues to ensure continued qualifications.

Local Income Tax Changes

Increased LIT Rates:

• SB 1 increases, beginning in 2028, the maximum local income tax (LIT) rate that a county can impose on its residents from 2.5% to 2.9%.

Municipal LIT Rates:

• SB 1 authorizes a city or town to impose, by passing an ordinance, a municipal LIT rate beginning in 2028 not to exceed 1.2%. This is in addition to the county income tax assessed.

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.