Property tax reform package heads to governor, lawmakers warn of service cuts

The Senate gave its final stamp of approval to a major property tax reform package Tuesday, sending the measure to the governor.

The headline, from Sen. Travis Holdman (R-Markle): Property tax relief for most homeowners.

“Two-thirds of homeowners in 2026 will receive a bill less than they received in 2025,” Holdman said.

Beginning next year, homeowners will receive a credit on their property tax bill of 10 percent of the bill, up to $300. Those aged 65 and older and disabled veterans would receive additional credits of $150 and $250, respectively.

Senate Bill 1 is expected to cost local governments up to $1.8 billion over just the next three years. Republicans’ answer to that is new local income tax options.

But Sen. Greg Taylor (D-Indianapolis) said local officials aren’t going to raise income taxes.

“You mark my words; you’re going to cut services,” Taylor said. “You think we’ve got road problems? You think we’ve got access to government service problems here? Just wait.”

Sen. Scott Baldwin (R-Noblesville) said providing relief to Hoosiers will mean local governments and schools might not receive as much money as they would have — but it doesn’t mean loss.

“Most schools — there are some anomalies, no doubt — will get more money in ‘26 than they got in ‘25,” Baldwin said. “Most local governments will get more money in ‘26 than they got in ‘25.”

But the property tax changes aren’t the only provisions affecting schools. Language amended into it from SB 518 would require local property tax revenue to be shared between traditional public school districts and charter schools, starting in 2028.

Sen. LaKeisha Jackson (D-Indianapolis) said that requirement, added into the property tax changes, deals a devastating blow to some schools.

“For some, it will defund them and possibly, potentially close them,” Jackson said.

Sen. Linda Rogers (R-Granger) said property tax sharing ensures all students in the district receive the benefit of those dollars.

“What this is — it’s fairness,” Rogers said. “The money follows the student.”
 

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All but the largest businesses in Indiana get a big win in the bill.

Business personal property tax is an annual tax businesses pay on their equipment. Under current law, businesses with equipment that totals less than $80,000 are exempt. Senate Bill 1 increases that threshold to $2 million in the next few years.

Baldwin said that means most businesses who currently pay that tax won’t have to anymore.

“But the bulk of the tax will remain, which really was a measure to protect those communities that have a strong reliance on business personal property tax,” Baldwin said.

The measure also makes long-term changes to property tax deductions. Right now, there is a standard homestead deduction of $48,000 and a supplemental deduction of 35 percent of the remaining assessed value. Those help determine the taxpayers’ final bill.

Beginning next year, the legislation slowly phases out those two deductions entirely to create a new, single deduction: 66.7 percent of the homestead’s assessed value.

The final Senate vote was narrow, 27-22, with some Republicans joining Democrats in opposition.

In a statement, Gov. Mike Braun said he’ll sign the bill. He called it “historic” property tax relief that makes the system “fairer, more transparent, and easier to understand.”

Lt. Gov. Micah Beckwith has criticized the legislation on social media, saying “nobody understands it” and calling on Braun to veto the bill and call a special session.
 

Brandon is our Statehouse bureau chief. Contact him at bsmith@ipbs.org or follow him on Twitter at @brandonjsmith5.