Property Tax Terms
Annually Adjusting Property Values - Annually adjusting property values is part of Indiana’s move to a market-based assessment system that began in 2002. Similar market-based assessment systems are currently being used in 48 other states.
The annual adjustments are calculated by comparing the prior year assessment with current sales data from a neighborhood. The difference, positive or negative, will be used to create a factor that assessing officials will apply to the property’s assessed value to bring it to current market value-in-use.
Under the old system, real estate was generally only reassessed every 10 years. That left taxpayers with a large change in their assessments every decade. Annual adjustments curb that large lump sum change in assessments by annually adjusting values based on sales.
Appraisal - A supportable estimate of the fair market value of a property arrived at through application of guidelines that consider a number of market conditions and economic factors.
Appraiser - This is the title given to the individual who conducts the appraisal and writes the appraisal report. Appraisers are usually certified by a state regulatory agency. In Indiana, appraisers are certified by the Indiana Professional Licensing Agency.
Arrears - The term used when taxes paid in the current year represent the taxes owed for the previous year. Property taxes in Indiana are paid in arrears and are typically due annually in two installments – May 10 and November 10.
Assessment - The official act of discovering, listing and appraising property for ad valorem tax purposes. “Ad valorem” tax refers to any tax imposed on the basis of the monetary value of the taxed item. In Latin, the term literally means “according to value.”
Assessment Appeal - The formal process through which taxpayers may dispute the assessed value of their property.
Assessed Value (AV) - The total dollar value assigned to all real property and improvements and personal property subject to taxation. Locally elected assessors determine property values with assessment guides prescribed by the Department of Local Government Finance. These values may be changed by the county’s Property Tax Assessment Board of Appeals. The Department of Local Government Finance assesses certain public utilities.
Budget Order - The budget order is a critical document in calculating tax bills. The order contains the state’s certification of budgets, tax rates, and tax levies for each taxing unit in a county. The order also documents the total tax rate and the local homestead credit rate for each taxing district.
Circuit Breaker - The means by which no more than a certain percentage of a property’s assessed value is paid in taxes. The percentage represents the “cap” for property taxes on the property. If the taxes for a property exceed the cap percentage, a property tax credit is issued for the dollar amount above the cap. The actual property tax to be paid would then equal the dollar amount of the property’s gross assessed value multiplied by the circuit breaker percentage cap. For example, if a property with a gross assessed value of $100,000 has a tax bill of $2,100 and the circuit breaker percentage cap is 2%, a tax credit in the amount of $100 would be issued for that property, thereby reducing the property tax amount due to $2,000 or 2% of its gross assessed value.
Controlled Project - A project is a controlled project if it costs more than the lesser of $2,000,000 or an amount equal to 1% of the total gross assessed value of property within the political subdivision on the last assessment date, if that amount is at least $1,000,000. In other words, if the proposed project costs $2,000,001 or more, it is probably a controlled project. For purposes of IC 6-1.1-20, the term “bonds” means any bonds or other evidences of indebtedness payable from property taxes, with some limited exceptions. Examples include new school construction, new library construction, remodeling and renovations of public buildings (including schools, libraries and local government offices), and beautification projects.
Deduction - A property tax benefit that reduces the assessed value of property. There are a number of property tax deductions available to Indiana taxpayers. Detailed information may be found on this website under the “Information for Taxpayers” section.
Exemption - A property tax benefit that excludes a property from taxation and, in some cases, assessment.
Homestead Deduction - The homestead deduction is the most commonly used property tax deduction in Indiana. It allows a homeowner who uses a property as his or her principal place of residence to qualify for a deduction of the lesser of 60% of the gross assessed value of the property or $45,000. This deduction potentially lowers the taxpayer’s property tax obligation. A taxpayer receiving a Homestead Standard Deduction is also entitled to receive a Supplemental Homestead Deduction. The amount of the Supplemental Homestead Deduction is 35% of the assessed value remaining after application of the Homestead Standard Deduction that is less than $600,000 and 25% of the remaining assessed value that is more than $600,000.
Levy - The product of a specified tax rate and the assessed value. Levy terminology includes “maximum levy” and “excessive levy.”
Market Value - The most probable price, estimated in terms of money, which a property would bring in a sale between a willing buyer and seller under arms-length conditions, in an open market with adequate market exposure and reasonable marketing time.
Market value-in-use - True tax value, or the market value-in-use of a property for its current use, as reflected by the utility received by the owner or by a similar user, from the property.
Personal Property - Personal property typically encompasses moveable items that are not permanently affixed to a physical structure. Examples of personal property include: farm equipment, appliances that are not “built in” to the structure, furniture, and similar items. Whereas personal effects are not subject to property taxation in Indiana, most depreciable personal property used in the production of income is.
Petition-Remonstrance Process - The petition and remonstrance process allows taxpayers to object to certain controlled projects or proposals initiated by a local unit of government.
Property Tax Levy - The property tax levy is the amount of money that a taxing body requires to be collected through the property tax system.
Property Tax Rate - A percentage applied to each taxing unit’s assessed valuation that will produce the amount of that taxing unit’s levy or, in other words, the product of dividing the levy by the assessed value. The tax rate is expressed in terms of “dollars per $100 of assessed value.”
Real Property - The interests, benefits, and rights inherent in the ownership of land and anything permanently attached to the land or legally defined as immovable.
Referendum - The local public question process generally applies to controlled projects and school operating referenda (for school corporations that need additional revenue to operate or offset circuit breaker losses). The referendum process can also be used in local government reorganizations.
Trending - The process whereby property values are adjusted (the adjustment can be positive or negative) on an annual basis to bring them closer to market value-in-use. The assessing official uses sales of properties in a neighborhood, area, or class of property from the previous 14 months to determine the adjustment factor. In the past, the assessed values of real property were adjusted only after a reassessment, which occurred as far apart as ten years. Unlike reassessments, trending occurs every year.
Sales Comparables - Sales comparables are sales of properties that are used to indicate the value of a property that is being assessed or appraised. Comparable sales are normally similar in condition, style, size, location and utility to the property being evaluated. For example: for a one-story brick ranch-style home in average condition with 4 bedrooms, 2 bathrooms, a living room, kitchen, family room, and 2-car garage located in a specific neighborhood, a comparable sale would be a one-story brick ranch-style home in average condition with 4 bedrooms, 2 bathrooms, a living room, kitchen, family room, and 2-car garage, ideally located in the same neighborhood as the home being assessed or appraised.
Special Assessments - An assessment against property levied by a government entity to pay for specific improvements such as sidewalks, sewers, street improvements, etc.
Taxing District - This is the term for the geographic area within which taxing units have the authority to fund themselves via property taxes.
Taxing Unit - An entity that has the power to impose ad valorem property taxes. Examples include counties, cities, towns, townships, and school corporations.