Indiana legislature phases out tax levies and implements new property tax regulations

Indiana Senate Bill 1, introduced on April 10, 2025, aims to reform property tax regulations and local income tax structures across the state. The bill seeks to address rising property tax burdens while providing mechanisms for tax relief and adjustments to local government financing.

Key provisions of Senate Bill 1 include a phased increase in the acquisition cost threshold for the business personal property tax exemption from $80,000 to $2 million. This change is designed to alleviate tax pressures on businesses, particularly small and medium-sized enterprises. Additionally, the bill proposes to phase down the homestead standard deduction to zero over five years, starting in 2031, while simultaneously increasing the supplemental homestead deduction to two-thirds of the assessed value of the homestead.

The legislation also introduces a property tax payment deferral program, allowing qualified individuals to defer part of their property taxes on homesteads, with a cumulative cap of $10,000. This initiative aims to provide immediate financial relief to homeowners facing economic hardships.

Senate Bill 1 has sparked notable debates among lawmakers and stakeholders. Proponents argue that the bill will modernize Indiana's tax system and provide necessary relief to residents and businesses. However, critics express concerns about the long-term implications of reducing homestead deductions and the potential impact on local government funding.

The bill also modifies the process for placing certain referendums on ballots, restricting them to general elections and altering the language used in ballot measures related to school funding and controlled projects. These changes are intended to streamline the referendum process and enhance voter understanding.

Economically, the bill's provisions could lead to significant shifts in local tax revenues, affecting funding for essential services such as education and public safety. Experts suggest that while the bill may provide short-term relief, its long-term effects on local budgets and services will require careful monitoring.

As Senate Bill 1 moves through the legislative process, its implications for Indiana's tax structure and local governance will be closely watched by residents, businesses, and policymakers alike. The bill's future will depend on ongoing discussions and potential amendments as it seeks to balance tax relief with the financial needs of local governments.