Property taxes in Indiana are administered at the local level and fund the services and activities of local governments, including police and fire protection, libraries, and local streets and other infrastructure.
Property taxes are collected from all property owners, including homeowners, rental property owners, and businesses.
The amount of property taxes collected from each property is determined by the budget of the local governments, the assessed value of a property, and deductions or credits claimed by the property owner.
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How is the state involved in property taxes?
The Indiana General Assembly is required under Article 10 of the Indiana Constitution to provide, by law, for a uniform and equal rate of property assessment and taxation and to set regulations to ensure a just valuation for taxation of all property, both real and personal.
The General Assembly has the authority under the constitution to exempt certain property classes from property taxation, including property being used for municipal, educational, literary, scientific, religious, or charitable purposes. Legislators have also opted to use state funds, raised under other forms of taxation, to supplement property tax collections and reduce property tax bills.
The Indiana Department of Local Government Finance, a state agency, provides oversight on assessments, levies, and the collection of property taxes in every county.
In 2008, the Indiana General Assembly enacted significant changes to Indiana's tax policies to provide major and permanent property tax relief for homeowners. The primary legislation, House Enrolled Act 1001-2008, provides relief through caps on property taxes, additional Homestead Credit funds, and removal of certain property tax levies. The following is a summary of major provisions impacting homeowners:
Property Tax Caps: Beginning in 2009 (payable 2010), property taxes will be capped based on the following assessed value percentages:
This change will benefit property taxpayers who would have paid property taxes in an amount greater than 1.5% of their property's gross assessed value (AV) in 2009,and 1% in 2010. While the caps will help some homeowners and businesses, they will cause revenue shortfalls for many school corporations and local units of government. The greatest impact will be felt in 2010, by which time the caps will be fully phased in.
Homestead credits: Additional homestead credits will be provided to homeowners in the amount of $620M in 2008, $140M in 2009, and $80M in 2010.
Supplemental deduction: Provides an additional 35% supplemental deduction for homes with assessed values up to $600,000. Any assessed value over $600,000 receives a 25% supplemental deduction.
Removal of levies: School corporation tuition support costs were transferred from property tax levies to the state. Also transferred to the state are levies for child welfare, Hospital Care for the Indigent, a portion of the Marion Co. Health & Hospital Corp., State Fair & State Forestry Funds, and the Dept. of Local Government Finance database management. In addition, the state will assume the county cost of child welfare services and incarcerating delinquent children in DOC facilities, as well as provide state support for all other assumed levies.
Sales tax increase: To help fund the property tax caps and transfer of local costs to the state, the state sales tax was increased from 6% to 7%, beginning April 1, 2008.