INDIANAPOLIS — After several cities and towns voiced their opposition, lawmakers have made significant alterationsto Indiana's Senate Bill 1.
This newly revised legislation introduces several key changes aimed at enhancing transparency and providing tax relief for residents while also still giving local communities tools to have funding for essential services.
One focus of Senate Bill 1 is the requirement for the creation of a property tax transparency portal. This portal is designed to help residents understand changes to their local property tax rates.
Additionally, the bill imposes limits on how much local governments can increase their budgets year over year. Municipalities will not be permitted to increase their overall budgets next year. Instead, they will have a one percent increase cap for 2027 and a two percent increase cap for 2028.
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The expectation is that these measures will ultimately result in savings that trickle down to taxpayers.
Impact on Local Governments
Justin Ross, a professor of public finance and economics at Indiana University, commented on the implications for local municipalities.
"It's different when you say, well moving forward when you are setting your plans, can't spend this amount. It's a different thing when you say whatever it is you plan for you are not going to be able to get the revenue to back it up," Ross explained.
He says local municipalities will have more time to plan for the impending changes.
The amended bill also introduces a first-time homebuyers tax credit and a property tax payment deferral program. The deferral program is optional for municipalities and each individual body will be able to set their terms on who is eligible.
In addition, it includes tax assistance for seniors and veterans.
According to the bill, referendums for funding must occur in November of even-numbered years, and a tax levy must disclose the amount of money required by local governments.
New Tax Credit and Payment Options
Schools will be allowed to hold consecutive referendums if there is a pressing operational or safety need.
The legislation establishes a process for homeowners who wish to delay some of their property tax payments. This optional program, which county fiscal bodies can implement, allows for a minimum delay of $100 and a maximum of $500, with a total deferral limit of $10,000.
Any deferred property taxes will become a lien on the property and will be due when the property is sold or when it is no longer the individual’s primary residence.
The county treasurer will oversee this program, and counties may charge interest on delayed payments, though the interest rate cannot exceed 4 percent.
For disabled veterans, the legislation increases the maximum tax deduction from $14,000 to $20,000 for veterans who are totally disabled or over the age of 62 with a disability rating of 10 percent or greater.
Projected Savings for Taxpayers
Taxpayers are expected to save an estimated $687 million by the third year the tax changes take effect. The property tax transparency portal is scheduled to launch no later than January 1, 2026.
The first-time homebuyers tax credit will have no age limit but will cap household income at $75,000 per year, and homes must not exceed a cost of $250,000. The credit provides $2,500 annually for five years for qualifying homes on homestead properties.
As the bill moves forward, lawmakers are likely to offer more amendments. It now heads to the full Senate for consideration.
Local officials that opposed Senate Bill 1 included Carmel Mayor Sue Finkman. She sent the following statement in response to the changes.
Following the amendments to SB1, our finance team is working to understand the bill's effects on Carmel residents. I will continue to advocate for a responsible, balanced approach to tax reform—one that delivers meaningful relief for taxpayers while protecting the very services that make our city a national success story.
As the bill continues to work through the legislative process, I remain committed to working with Governor Braun and legislative leaders on reforms that balance tax relief with maintaining Carmel's exceptional quality of life that attracts and retains Indiana talent.
Governor Braun's office also released a response to the changes.
Governor Braun remains committed to delivering meaningful property tax reform that puts taxpayers first by providing immediate relief, capping future growth, and simplifying the process through reform and transparency. Today, the Senate Committee on Tax and Fiscal Policy has taken steps in the right direction by proposing strong caps on future bill growth, reforms to the referendum process, and targeted relief for veterans, retirees, and first-time homebuyers, but Hoosier homeowners need a solution that includes broad and immediate reductions in their tax bills.
The Governor will carefully review the changes to his plan and looks forward to working with the House and Senate to strengthen the amended bill to include broad based and immediate property tax cuts for Hoosier homeowners who have been hit the hardest by skyrocketing home value inflation.
Accelerate Indiana Municipalities has been lobbying to support local municipalities and also testified against the bill last week. Their CEO Matt Greller sent the following statement in regard to the changes.
The Senate Tax and Fiscal Policy Committee amended SB 1 significantly and the bill appears to have improved over what was introduced. We look forward to additional conversations regarding a possible replacement source for what will still constitute meaningful funding shortfalls.
We are grateful that Chairman Holdman and his committee have made changes to the bill that are responsive to local concerns. City and town leaders look forward to continuing a respectful, productive dialogue with lawmakers and Governor Braun and his legislative team in the days and weeks ahead. It does not serve Hoosier taxpayers well to overhaul the current system in a manner that does more harm than good. An unbalanced approach represents the worst possible outcome for taxpayers and the governmental units they rely on for safe, livable, affordable, and well-maintained and well-appointed communities.
