The Hoosier State is famous for many things, from its prime agricultural production to its world-class automotive industry.
Additionally, Indiana has an attractive, unique culture and is home to a wealth of tourist spots and vibrant activities.
If you move to this state or invest in a property in the Indiana rental market, you'll enjoy many benefits. Indianapolis, the most populous city, is considered one of the best destinations for real estate opportunities.
However, as a landlord, property manager, or real estate investor, you should pay attention to many other things. Your property taxes are part of them.
Do you know how much you should pay for your primary residence if you live in Indiana? What happens if you don't pay your tax bills on time? Are there legal ways to reduce your property tax bills so you can maximize the profits of your investment?
If you're considering investing in a rental unit there, property taxes will be a crucial part of your financial duties. Therefore, it's essential to know the laws, relief programs, and rules that may affect your payments or help you optimize your tax strategy.
Fortunately, we've created this comprehensive guide on property tax in Indiana. Read on to find all the information you were looking for!
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Understanding Different Types of Property Tax Bills in Indiana
Before delving into payment dates, how these amounts are calculated, and other key aspects, let's understand what property taxes are and what they're used for.
When it comes to collecting and administering property taxes, local government officials play a key role. This includes counties, cities, towns or townships, libraries, fire or solid waste districts, and more.
Local government units use property taxes as a source of funds for their services, projects, and programs.
A great portion of property taxes goes to welfare, new construction and building maintenance, police and fire services, and infrastructure, such as highways, streets, and roads.
Property tax dollars are also used to fund government operations, including officials' salaries.
Since Indiana property taxes are ad valorem, they're allocated based on the value of taxpayers' properties.
This process is also known as the property tax assessment and billing cycle. It begins with an evaluation by a county assessor to determine the value of a property.
This "assessed value" varies depending on the property class, falling into the following categories:
A county auditor, the Department of Local Government Finance (DLGF), and the county treasurer also play fundamental roles throughout this process, from assessing the property to mailing tax bills to each taxpayer.
In Indiana, property tax rates are considerably low compared to other states, but it's essential to make payments on time to avoid additional charges or penalties.
How Many Times Do You Pay Property Tax a Year in Indiana?
The county treasurer should mail the TS.1 property tax bill and comparison statement at least two weeks before May 15.
Unlike other states, Indiana doesn't require homeowners to pay taxes annually. Instead, property taxes are divided into two installments, so these obligations require attention at least twice a year.
In this regard, these are the payment dates for Indiana taxpayers:
- First installment: Homeowners should pay the first half of their property taxes on May 10. It's also known as the spring installment.
- Second installment: Homeowners should pay the second half of their property taxes on November 10. It's also known as the fall installment. However, since it's a state holiday, the actual due date is November 13.
However, property tax due dates may change. Taxpayers can expect to receive a statement with upcoming due dates in spring.
Consequences of Late Payments
As mentioned, Indiana property owners who don't pay real estate taxes by the date they're due are subject to penalties and additional charges.
Here's an overview of the penalties you may face if you fail to pay your property taxes on time.
If you don't pay your property taxes by the due dates, you may receive a financial penalty or additional charge. This varies based on how long it takes you to pay overdue bills.
The penalty is 5% of any taxes remaining unpaid if you pay your bills within 30 days of the due date as long as you don't owe back taxes on the same property.
However, the penalty can be higher, up to 10% of the unpaid tax amount, if you miss the deadline and don't pay the penalty within 30 days of the original due date.
Indiana also allows local governments to place a lien on a property with delinquent taxes. Essentially, a lien is collateral for your debt and allows these units to recoup what they're owed.
A property lien makes your title unclear, so it's important to pay off the debt. However, you have some time before local government units consider this measure.
When taxes remain unpaid, the local government is authorized to sell your property through a tax sale or auction.
The main objective of this process is to recover delinquent property taxes. However, the winning bidder doesn't get ownership of your house or building right away and must wait for the overdue amounts to be paid, which takes some time.
The county auditor and treasurer must also obtain a court judgment to sell your property and are required to mail you a notice at least 21 days before making the application for judgment or order for the sale of eligible real property, whichever comes first.
Also, county auditors have to post a copy of the notice in a public county building, such as the county courthouse, and publish it in a newspaper for at least three weeks.
Taxpayers can pay the debt during a redemption period to avoid losing their properties permanently.
However, this doesn't apply to vacant or abandoned property under Indiana law.
How Can Homeowners Redeem Their Properties After a Tax Sale?
In Indiana, taxpayers can get their properties back even after they're sold at a tax sale. In this case, you only have to pay the buyer the amount they paid or catch up with the taxes owed.
However, you'll also need to pay interest and should do so before the redemption period ends. In rare cases, Indiana taxpayers can set aside or overturn the sale.
The redemption period in Indiana is one year after the tax sale. However, taxpayers only have 120 days to claim a property in the following scenarios:
- The county acquires a lien, and the certificate of sale isn't sold (120 days after acquiring the lien) or is sold (120 days after acquiring the certificate of sale) as a result
- The certificate is assigned to a political subdivision
- An eligible urban homesteading program gets the certificate of sale
How to Pay a Property Tax Bill in Indiana
Property tax payments should be made through your county treasurer. However, there are many ways to pay your taxes.
Indiana residents can make a one-time full or partial payment or arrange ongoing payments through the county treasurer's website. Also, you can pay your taxes by phone, mail, or at a participating bank.
How Much is Property Tax in Indiana?
Different factors can affect real property taxes in this state, including the following:
- The local government's fiscal management
- The property tax levy
- The assessed valuation of a property
- Local tax rates
These factors are based on local government units' budget proposals, which are submitted to the Department of Local Government Finance (DLGF) each year.
After reviewing the budget proposals, the DLGF adjusts and approves them, setting a tax rate for each taxing unit.
How Is Property Tax Calculated in Indiana?
To calculate your property taxes, you should consider the following elements.
Property Tax Levy
The tax levy is the cap on the amount of tax dollars that local government units can collect based on the amount they collected the previous year. Units can use the "growth factor" to increase this levy.
Net Assessed Value of a Property
After the county assessor assesses the property, this data or "gross assessed value" is transferred to the county auditor.
After that, the auditor applies deductions, exemptions, and other adjustments, which results in the certified net assessed value.
Property Tax Rates
The DLGH calculates the tax rate by dividing the local government unit's levy by the net assessed value. This is the formula used for calculating tax rates:
- Tax Rate = Total Levy / (Total Net Assessed Value / 100)
Calculating Your Tax Bill
After defining these elements, you can calculate your tax bills by multiplying your net assessed value by your local tax rate, which is calculated on a per $100 basis in Indiana.
The result is your total tax bill for the year, but you can further reduce it with tax credits.
How Can I Lower My Property Taxes in Indiana?
Indiana property taxes aren't too high, but you can use one of the options below to lower these amounts.
If you believe that the assessed value of your property on your tax bill doesn't reflect the actual market value, you can appeal this assessment. You must do this process through your county assessor by June 15 of the year you receive a Form 11 if it's mailed or by June 15 of the following year if it isn't.
Indiana also has multiple property tax relief programs, allowing taxpayers to apply deductions before calculating tax liability. These are the most common options:
- Homestead Standard Deduction
- Supplemental Homestead Deduction
- Over 65 Deduction and Over 65 Circuit Breaker Credit
- Veteran Deduction
- Disabled Person Deduction
- Rehabilitated Property Deduction
- Historical Rehabilitated Property Deduction
- Heritage Barn Deduction
- Geothermal, Solar, Wind, or Hydroelectric Deduction
- Enterprise Zone Investment Deduction
Taxpayers can also get a full or partial waiver on their property tax liability under certain circumstances. The most common are for religious groups, not-for-profit organizations, and economic development purposes.
This type of property tax relief can reduce your tax liability even before the amount is calculated. These are the two most common credits:
- Circuit breaker credit
- Local property tax replacement credit
Important Propositions for Real Estate Investors in Indiana
There are no propositions that affect property tax amounts or management in Indiana. However, lawmakers have been pushing a proposal that seeks to provide residents with tax relief.
In February of 2023, Indiana lawmakers approved major changes to this proposal, including other remedies to temporarily drop tax bills.
This proposal also seeks to introduce a short-term property tax cap, limit how many local government units can raise tax levies, and increase state income tax deductions. However, it's still in its working stages.
Indiana offers many opportunities for residents looking for a new place to live and real estate investors interested in a thriving market.
However, property taxes have real-life consequences and can significantly impact your finances. Therefore, it's essential to understand how they work and know all the resources available to maximize your investment.
Do you still have questions about property taxes in Indiana? Don't hesitate to seek help from a tax professional!
If you're looking for more tips on property management accounting, check out our whitepaper on the best tips for simplifying this complex process.