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New Indiana Law Targets High Property Taxes

Homeowners will see some financial relief, including a tax credit of 10 percent off of every homestead’s bill, up to $300.

Cynthia Pasquale,

AARP

Published March 01, 2026

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Many Hoosiers have seen their home values increase by double digits in recent years — and have watched their property taxes climb as well.

Starting this year, a new law aimed at providing homeowners with financial relief will begin phasing in property tax changes through 2031.

One immediate change: homeowners can receive a tax credit of 10 percent off of every homestead’s bill, up to $300. There is an additional credit of $150 for those 65 and older. The way farmland is assessed will also be modified, helping reduce farmers’ tax bills. And the law increases the exemption on personal property for businesses from $80,000 to $2 million.

Gov. Mike Braun (R) called the bill “historic” when he signed it into law in April 2025. However, critics of the law and some local governments are concerned the changes could add up to lost municipal revenue and reduced services for residents.

State Sen. Travis Holdman (R-Markle), one of three main authors of the law, says that two-thirds of homeowners will receive a lower bill in 2026 compared with 2025. Holdman notes that legislators “tried to find a good balance” between being fair to taxpayers and to local governments.

It was difficult to make everyone happy, he says, but “I think we got there because nobody’s happy.”

AARP Indiana supported one provision in the law that allows approved applicants to defer as much as $500 of their tax bill each year, up to $10,000 total over multiple years.

“We believe that offered a balanced approach to address the challenge of funding vital community services while also providing tax relief for folks that need it most,” says Jason Tomcsi, AARP Indiana’s communications director.

A December 2024 AARP survey of 1,001 Indiana homeowners 50 and older found that 44 percent were concerned about being able to afford property taxes on their primary residence.

Another of the law’s provisions phases out the state’s $48,000 property tax deduction over five years. But it also boosts the supplemental homestead deduction over that same period to up to two-thirds of a home’s assessed value.

AARP Indiana plans to hold virtual events around the state to educate homeowners about the law’s provisions. They will be similar to one held last November that included a discussion with representatives from Allen County, Fort Wayne, Purdue University and others. Go to aarp.org/inpropertytaxes for a link to a YouTube video of the event.

Statewide, net tax on homesteads increased an average of 7.8 percent from 2024 to 2025, according to the state Office of Fiscal and Management Analysis.

However, about two dozen counties saw double-digit increases over that period, with Posey County in the southwestern corner of the state experiencing the biggest jump, at 19.6 percent.

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“Tax rates have fallen, but not by as much as assessed values have risen, so bills are up,” says Larry DeBoer, emeritus professor in agricultural economics at Purdue University.

Impact on Cities, Counties

While the new law offers homeowners some relief from higher property tax bills, critics warn the lost tax revenue will force cities and counties to cut budgets.

“What a lot of people don’t understand or realize yet about this bill is that, yes, there are some moderate property tax cuts for homeowners in Indiana, but ... cities and towns are going to see significant reductions in revenue,” says Matt Greller, CEO of Accelerate Indiana Municipalities, a nonprofit advocacy organization.

In anticipation of the law’s effect, the Charlestown City Council passed a 2026 budget with across-the-board cuts, including to the parks department and for city maintenance. Greller says he’s seen other pre-emptive moves across the state: One community scrapped plans for a full-time fire department and is retaining its volunteer firefighters. Some cities are closing amenities like swimming pools and parks.

As a counterbalance, the law gives municipalities the power to set their own income tax rates. Counties currently determine that rate and then distribute revenue to cities and towns according to their specific tax levies. But Greller’s group and other advocates are calling for tweaks to the law, especially with local income tax provisions, to help ensure that municipalities have some capacity to address property tax impacts.

David Bottorff, executive director of the Association of Indiana Counties, says industrialized communities may be hardest hit when small to medium businesses no longer have to pay property taxes on equipment.

Holdman, the state senator from Markle, says instead of raising local income tax as a replacement for revenue loss, governments should “look at efficiencies to make sure they are spending all the money in the right way. I think that’s a fair and balanced approach.”