State Senator Schmitt clarifies property tax changes, emphasizes local control benefits

Senator Schmitt conducting outreach meetings across District 48 to explain Senate Enrolled Act 1 provisions and address confusion about revenue projections

State Sen. Daryl Schmitt is holding a series of public meetings across District 48 to clarify provisions of Senate Enrolled Act 1, Indiana’s new property tax reform law, and address confusion about its financial impact on local governments.

Schmitt is meeting with county councils, city councils, and mayors throughout the district to explain the legislation, which he describes as a seven-year plan to transition from a levy-based property tax system to a rate-based system.

“There was a ton of confusion out there on differences and there’s confusing forms out there,” Schmitt said during a recent phone interview. He created a summary document of all changes in Senate Enrolled Act 1 after realizing the extent of misunderstanding about the law’s provisions.

According to the senator, what many local governments view as revenue losses are actually reductions in projected increases, not cuts to existing budgets.

According to revenue projections Schmitt provided, most taxing units will see slight revenue increases under the new law over the next three years, though it is less than it would have been under the previous system. School corporations are being hit the hardest because the majority of property taxes go to support Indiana public schools.

Northeast Dubois County School Corporation, for example, shows a projected decrease of $61,927 in 2026 than it did this in 2025, and $88,745 less than projected under previous law by 2027. However, Schmitt notes that the state added approximately $930 million to tuition support statewide to offset property tax reductions affecting schools.

“The schools collect, receive most of the money for property taxes, roughly two thirds. So that’s why they were affected. But that is also why there was $930 million added to the tuition support that the state provides to hopefully smooth that out,” Schmitt said.

The legislation includes several major changes taking effect over the next several years.

Beginning in 2026, homestead properties receive a new 10 percent property tax credit capped at $300. By 2031, homestead properties will receive a two-thirds deduction, meaning owners pay property taxes on only one-third of their assessed valuation.

Properties in the 2 percent tax cap category, including rental properties, will be taxed on two-thirds of their assessed value by 2031, while 3 percent properties pay on the full assessed value.

The law eliminates the business personal property tax 30 percent floor for equipment placed into service after Jan. 1, 2025, and increases the exemption threshold from $80,000 to $2 million beginning in 2027.

However, properties within existing Tax Increment Financing districts remain subject to current law until bonds are paid off in full, meaning they will not benefit from the property tax relief provisions. In Schmitt’s chart, the TIF areas in the county have significant increase in property taxes that are collected.

A significant component of the reform involves changes to the local income tax structure. Beginning in 2028, the current combined county LIT system ends, allowing municipalities with populations of 3,500 or more to establish their own LIT rates up to 1.2 percent.

Counties can adopt LIT rates up to 2.9 percent total, allocated among general county purposes, fire protection and emergency medical services, non-municipal civil taxing units, and small municipalities ineligible to adopt their own rates.

“The local communities will ultimately have the decision to make the choice of what the rate’s going to be,” Schmitt said.

Schmitt views the shift as beneficial for local governance, allowing communities to make decisions based on their specific needs rather than having rates dictated by the state.

“Instead of collecting the income tax at the state, it’ll be collected at the local level. I think that we can make better decisions at the local level,” he said. “If there’s a demand for more services, local governments will be able to adjust the local income tax to increase services for the people.”

The senator acknowledges the transition will include challenges but emphasizes that many provisions don’t take effect until 2027, providing time for the legislature to address unintended consequences.

“There are going to be some hiccups in this seven years transitioning to that. But that’s the long term goal is to move decisions to the local level and be more efficient and give local units the flexibility to do it,” Schmitt reiterated.