Indiana SB1 Overhauls Property Tax Rules

Overview

On April 15, Indiana Governor Mike Braun signed Senate Bill 1 (SB1) into law—a sweeping property tax overhaul with major implications for commercial and industrial taxpayers. The legislation increases business personal property exemptions, alters tax increment financing (TIF) mechanics, and sets the stage for rising property tax burdens on non-residential property owners.

Key Takeaways

• Business Personal Property Exemption Expanded: The exemption threshold increases from $80,000 to $1 million in 2025 and $2 million in 2026, exempting many assets from taxation. The exemption applies if the total acquisition cost of a taxpayer’s business personal property in a county is less than $2 million.
• Valuation Floor Removed: The longstanding 30% floor no longer applies to personal property placed in service after January 1, 2025—a win for capital-intensive businesses.
• Homestead Deduction Reforms: Over the next five years, the standard homestead deduction will be phased out, increasing reliance on the supplemental deduction—shifting more of the tax burden to commercial property.
• New Cap on Levy Growth: Starting in 2026, political subdivisions must adopt rate/levy increases via ordinance and public hearing, even when assessed value (AV) grows.

Background

Prior to Indiana SB1, the state’s personal property tax system included a de minimis exemption for assets under $80,000 in acquisition cost, and a minimum 30% valuation floor on depreciable assets. This disproportionately impacted manufacturers, utilities, and other businesses with aging or specialized equipment. SB 1 updates these provisions and introduces several tax policy shifts in response to rising residential tax burdens and concerns over levy creep.

The legislation also mandates base AV adjustments in TIF districts to counteract increased homestead deductions, which could constrain incremental revenue and affect financing for economic development.

“This legislation is a game-changer for Indiana taxpayers. The expanded exemptions and removal of the valuation floor create major opportunities for businesses planning significant equipment investments—but they also raise the stakes for effective tax planning as commercial properties take on more of the state’s tax load.”

—Bill Faulkner, Vice President, Property Tax

Implications for Businesses

These changes introduced under Indiana SB1 create new savings opportunities for businesses with capital expenditures, particularly in manufacturing, hospitality, utilities, and commercial real estate. But the law also shifts greater tax responsibility onto commercial and industrial property, especially as the homestead deduction phases out.

Companies with Indiana assets—especially those investing in new equipment or managing diverse real estate portfolios—should assess the impact on their effective tax rates and appeal strategies.