Your EZ Guide to Understanding Indiana Property Taxes

Indiana property taxes are the lifeblood of our local services, ensuring the functioning of schools, police and fire departments, and infrastructure projects. However, the tax burden is not always evenly distributed. Homeowners and potential property buyers can gain valuable insights into their financial obligations by understanding how Indiana calculates and assesses its taxes. This knowledge paves the way for smarter financial decisions. Dive into Indiana property taxes and see how they stack up nationally.

How Property Taxes in Indiana Work

You won’t pay the state a property tax. That’s because it’s the local counties, cities, and school districts that collect the taxes. If you hear about the Department of Local Government Finance (DLGF), it’s the branch that oversees property tax administration. It ensures the local collection of property taxes follows Indiana law. It’s part of a checks-and-balances system.

Real estate taxes are also known as “ad valorem taxes” because Indiana assesses them based on the property’s value. Per dollar of taxes paid, the majority of the tax base goes to funding schools, followed by cities or town operations.

The tax assessment process involves evaluating the property’s market value. This is multiplied by an assessment ratio to determine the assessed value. In Indiana, the assessment ratio is set at 100%. It means the assessed value is equal to the market value. However, there are ways to lower this assessed value, and by extension, your annual property tax payment, as explained below.

Comparatively, Indiana ranked no. 22 for property tax burden in 2023. Homeowners had an average effective property tax rate of 0.84%. That measures the percentage of taxes paid against the home value. For Indiana’s median home value of $251,600, owners paid an average of $2,121.46 yearly.

Assessment and Tax Rates

Local government officials, known as assessors, determine the market value of Indiana properties. They conduct assessments annually to ensure that property values reflect current market conditions.

These value assessments are sent to the county auditor, who then applies deductions, exemptions, and any other valuation adjustments. This is your “certified net assessed value.” The net value is next sent to Indiana’s DLGF, which calculates property taxes needed based on each taxing unit’s approved budget. It kicks this figure back to the taxing district. Finally, the county calculates individual owner property tax payments and mails the tax bills. Payments are made to the county treasurer.

Indiana uses the mass appraisal technique to value homes. This means property attributes like age, grade, and condition are compared against other nearby properties. Value adjustments are based on these factors and recent real estate sales data.

Homeowners should receive a property value notice either as Form 11 or on the TS-1 tax comparison statement. This comes from the local property tax collector.

Setting Indiana Tax Rates

Indiana property tax rates are set based on the local government’s operating budget. Increasing the budget doesn’t always increase the property tax rate. It depends on how property values and the number of taxable properties change. If property values rise, tax rates may stay the same or decrease.

The DLGF reviews all local fiscal budgets to ensure they meet Indiana regulations. It must approve the taxing unit’s budget before developing tax rates. All individual taxing units must have DLGF approval: townships, cities, libraries, emergency services, and schools. Where common entities overlap, it forms a “taxing district.” Indiana has almost 2,000 individual taxing districts!

Each taxing unit has a maximum tax levy or the highest amount they can charge each year. It’s based on the prior year’s maximum.

Finally, the Indiana property tax rate is expressed in dollars per $100 of net assessed value. For example, if the tax rate is 2.5, it means you owe $2.50 per $100 property value. Say a property’s net assessed value is $200,000; the property tax owed would be:

Property Tax=($200,000/100)×$2.50=$5,000

County Taxes

Curious where the most and least property taxes are paid in Indiana? Looking at the effective property tax rates by counties, here are the highest and lowest. This accounts for property values as well as tax rates. Note this is just for county taxes, and not necessarily the individual taxing district. Indiana counties average 20 tax districts.

Highest property taxes:

Marion County: 1.19%
Lake County: 1.18%
Vigo County: 1.07%
Saint Joseph County: 1.07%

Marion County includes the City of Indianapolis, while Lake County is the northwesternmost county and part of the Chicago metro. Saint Joseph County includes the city of South Bend, while Vigo is more rural. However, by dollar figure, the highest median property tax payments were in Hamilton Count–$2,562 in 2024. Even at the highest effective tax rate, Marion County owners paid $1,395 for median property taxes.

Lowest property taxes:

Pulaski County: 0.39%
Clay County: 0.47%
Warren County: 0.49%
Jasper County: 0.49%

All four are more rural counties with under 50,000 residents and low median home values. Their median payments for property taxes fell under $800 in 2022.

Tax Caps and Exemptions

Indiana has implemented tax caps to limit the change in personal property tax bills. These caps are set at 1% for homestead properties (primary residences), 2% for other residential and agricultural land, and 3% for business properties. The tax caps are intended to provide predictability and affordability for taxpayers.

Additionally, several property tax exemptions and deductions are available to Indiana homeowners. You don’t need to reapply for any of these yearly, only when the property sells or the title changes. Some common deductions include:

Homestead Deduction: Reduces the taxable value of a primary residence. It is not income-based and applies to all primary homes. It is $48,000 or less than 60% of the homestead’s value.

Solar Energy System Deductions: The deduction is equal to the cost of installing the components for anyone installing or using solar or other green energy types.

Mortgage Deduction: Provides a deduction for homeowners with a mortgage.

Over 65 Deduction: Available to senior citizens meeting specific income and property value criteria. The deduction is the lesser of half the property’s value or $14,000.

Over 65 Circuit Breaker Credit: This prevents tax liability increases above 2% from the prior year. It has income, age, and credit restrictions.

Disabled Veterans Deduction: Two versions are available to veterans with disabilities or their surviving spouses. There are restrictions based on service, age, and disability limitations. Its max amount for the disabled veteran is $14,000, while the service-connected disability deduction is $24,960.

Making Tax Payments

Property taxes in Indiana are typically billed annually but paid in two installments—one on May 10 and one on November 10. Indiana requires counties to mail each taxpayer a TS-1 property tax statement at least 15 days before the tax payment is due. Failure to pay property taxes on time can result in penalties and interest charges. Late payments are assessed a 5% penalty within the first 30 days and a 10% penalty after that. If the

Payment options include mailed, paid in person, at a participating bank, or online in some counties. If your escrow account collects the taxes, they have responsibility for payment. You can make a full or partial payment. It’s also possible to make phone payments using a credit card or debit card. Additional fees may apply.

Indiana Tax Appeals

If a property owner disagrees with the assessed value of their property, they have the right to appeal the assessment. The owner must file any appeal with the local county assessor by June 15 of the year they receive Form 11.

The appeals process usually involves presenting evidence to support a claim that the value assessment is incorrect. Recent sales of comparable properties count. Appeals are first reviewed by the local assessment board. It can be further appealed to the Indiana Board of Tax Review if necessary.

Indiana Property Taxes

The collection of property tax is a vital component of the state’s revenue system. Through checks and balances, Indiana strives to have a process designed to be fair and reflective of market conditions. Understanding the calculation methods, available exemptions, and the appeals process helps homeowners manage their tax bills.

This information is intended for educational purposes. Please consult a certified tax professional for advice. All information was accurate as of August 2024.