How Property Taxes Are Figured in Indiana

Property taxes in Indiana are based on the assessed value of your property, and they help fund local services like schools, police and fire departments, county roads, and libraries. Here’s a breakdown of how it works:

1. Your Property Is Assessed

Each year, your local county assessor estimates the value of your property (land + buildings). This is called the assessed value. They try to estimate what your property would sell for on the open market.

🏠 Example: If your home is assessed at $150,000, that’s the number used to calculate your taxes.

2. You Get Deductions (If You Qualify)

Indiana offers several property tax deductions that reduce the amount of your home’s assessed value before taxes are calculated. Common deductions include:

  • Homestead Deduction – for your primary residence
  • Mortgage Deduction
  • Over 65 Deduction
  • Veteran’s Deduction

💡 These deductions don’t reduce your tax rate — they reduce the value your taxes are based on.

3. Taxing Units Set Their Budgets

Your property tax bill helps fund multiple local units of government:

  • County government
  • Township
  • School district
  • Public library
  • Fire protection, etc.

Each of these units sets a budget each year. The amount of money they need (after other revenues) determines the tax rate.

4. Tax Rate Is Applied to Your Net Assessed Value

After all deductions are applied, the tax rate (per $100 of assessed value) is applied to your net assessed value.

🧮 Example:

  • Home value: $150,000
  • Homestead deduction: $45,000
  • Mortgage deduction: $3,000
  • Net assessed value: $102,000
  • If your local tax rate is 2%, your tax would be about $2,040.

5. Tax Caps Limit What You Pay

Indiana has property tax caps, also known as circuit breakers, which limit how much you can be charged:

  • 1% of assessed value for homesteads (primary residence)
  • 2% for other residential property (rentals, second homes)
  • 3% for commercial/agricultural property

✅ That means your bill can’t exceed 1% of your home’s gross assessed value — unless voters approve a referendum (such as for school funding).

Key Takeaway

Your property tax is determined by:

  1. The value of your property
  2. Any deductions you qualify for
  3. Local government budgets
  4. The constitutional tax caps

If tax bills are going up, it’s usually because property values have increased or local governments have increased budgets or passed a referendum.