Analysis of Indiana Senate Bill 1 (Latest Version – February 11, 2025)
Indiana Senate Bill 1 (SB 1) is a comprehensive property tax reform bill aimed at curbing tax increases, providing targeted relief for homeowners, increasing tax transparency, and limiting local government spending. The bill introduces new restrictions on property tax growth, implements new tax credits for homeowners, and restructures referendum rules for school districts and local governments.
The bill has passed the Indiana Senate and will move to the Indiana House of Representatives for further consideration. Below is a detailed breakdown of the latest version of SB 1, including what has been removed or changed and the next steps in the legislative process.
Key Provisions of SB 1
Property Tax Deferral Program
SB 1 allows county fiscal bodies to establish a property tax deferral program for qualified homeowners.
Who Qualifies?
Homeowners who meet income and assessed value criteria set by the county.
How It Works:
Qualified homeowners can defer part of their property taxes owed on their homestead. The total amount deferred over multiple years cannot exceed $10,000.
Deferred taxes must be paid in full when a deferral termination event occurs, such as:
- The sale of the property
- The death of the homeowner
- The owner is moving out of the home
Property Tax Caps & Levy Growth Restrictions
SB 1 freezes and restructures the maximum levy growth quotient (MLGQ), limiting how much local governments can increase property taxes.
Tax Levy Growth Caps
- 2026: 0% growth cap – Local governments cannot increase tax levies from 2025 levels.
- 2027: 1% growth cap
- 2028: 2% growth cap
- 2029 & Beyond: New growth calculation based on economic indicators.
How the New Growth Rate Will Be Calculated (Starting 2029)
Instead of a fixed cap, tax levy growth will be tied to a formula based on:
- Personal consumption expenditures
- Statewide wage growth
- National labor productivity
- County-level income growth
This change limits excessive property tax hikes while allowing modest, data-driven adjustments based on real economic conditions.
New Tax Credits & Deductions for Homeowners
First-Time Homebuyer Tax Credit: This applies to first-time homeowners who purchase a primary residence in Indiana. Available for the first five years of homeownership. Annual credit of up to $2,500 (total lifetime limit of $12,500).
Eligibility:
- Household income must not exceed $75,000
- Home’s assessed value must be $250,000 or less
Expanded Property Tax Deduction for Seniors (65+) Income limits raised for eligibility:
- Single filers: $60,000
- Joint filers: $70,000
- Maximum assessed value eligibility raised from $240,000 to $300,000.
- The deduction amount increased from $14,000 to $20,000.
Expanded Property Tax Deduction for Disabled Veterans
- This applies to disabled veterans who are totally disabled or aged 62+ with a partial disability.
- Deduction increased from $14,000 to $20,000.
- Maximum assessed home value raised to $300,000.
Limits on Local Government & School Tax Referendums
SB 1 restricts when local governments and school districts can seek tax increases through referendums.
- School districts can only place tax referendums on general election ballots.
- A school must wait two years after a previous referendum expires before requesting a new one.
Local Government Levy Increases Require Public Approval
Local governments cannot increase tax levies beyond the prior year’s amount unless:
- A public hearing is held
- An ordinance is passed by the fiscal body
The ordinance must state:
- Why the increase is needed
- How much the tax levy will increase
- The expected percentage increase in the tax rate
- Property Tax Transparency Portal
SB 1 requires the Indiana Department of Local Government Finance (DLGF) to develop an online transparency portal where taxpayers can:
- Compare their current tax bill vs. potential future tax bills under new rates.
- Submit public feedback directly to the DLGF about proposed tax increases.
New Restrictions on General Obligation Bonds
Local governments cannot issue new general obligation bonds (funded by property taxes) within two years of a previous bond’s expiration, unless:
- There is a natural disaster, accident, or emergency.
- The Department of Local Government Finance grants an exemption.
This prevents local governments from continuously increasing debt without accountability.
What Was Removed from the Bill?
Several provisions were removed or significantly altered in the latest version of SB 1:
- Stronger Property Tax Levy Freezes Were Removed
- The original version proposed an indefinite freeze on tax levy growth. Instead, the final bill phases in growth caps (0%, 1%, 2%) before switching to an economic formula in 2029.
- More Severe School Referendum Restrictions Were Weakened
- The original bill banned schools from requesting a new referendum for three years after one expired. The final bill shortened this to two years.
- Stronger Spending Caps for Local Governments Were Dropped
- The first draft forced local spending to stay at prior-year levels regardless of revenue growth. The final bill allows tax increases if local officials publicly approve them.
Next Steps for SB 1
Now that SB 1 has passed the Indiana Senate, it moves to the Indiana House of Representatives. Here’s what happens next:
Committee Review in the House
The bill will be assigned to the House Tax and Fiscal Policy Committee for hearings.
Lawmakers can amend the bill by removing, modifying, or adding provisions.
House Floor Vote
If the bill passes the committee, it goes to the full House for a vote.
Reconciling Differences (If Needed)
If the House makes changes, the bill must return to the Senate.
If the Senate disagrees with House amendments, a conference committee will negotiate a final version.
Governor Braun’s Signature or Veto
If the House and Senate agree, SB 1 is sent to Governor Mike Braun.
Governor Braun can:
Sign it into law
Veto it (which the Legislature can override with a majority vote)
Let it become law without a signature
Implementation Timeline
Certain provisions take effect retroactively on January 1, 2025 (such as the first-time homebuyer credit).
Other provisions phase in through 2029, including the new tax levy growth calculation.
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