Miner & Lemon Blog

Tax Savings Series Part 5 - "Indiana Property Tax Reform or Indiana Property Tax Fiasco"

In December 1998, the Indiana Supreme Court determined that Indiana’s then-existing property tax scheme was unconstitutional.  State Bd. of Tax Com'rs v. Town of St. John, 702 N.E.2d 1034 (Ind. 1998).  In the following years, the system was revised in an attempt to bring it into conformity with Indiana’s Constitution.  This attempt has been met with significant distress, as those who formerly paid low property taxes have either been (a) forced to finally start paying their fair share, or (b) unfairly targeted for excessive property tax hikes, which determination is largely based upon whether or not the property taxes of the one making the determination have recently increased.  But those folks who have been unfairly targeted for excessive property tax hikes should not despair as there are a few avenues for addressing that concern.

            One possible means of lowering the property tax liability is to dispute the assessed value of the property.  The assessed value is multiplied by the property tax rate (which varies from place to place), and, accordingly, a decrease in the assessed value will result in a decrease in the amount of property tax owed.  The assessed value can be disputed by first filing an appeal with the local official responsible for the assessment, who will then forward the appeal on to the County Property Tax Assessment Board of Appeals.  If the taxpayer is not satisfied with the determination made by the County Property Tax Assessment Board, then he or she may file an appeal with the Indiana Board of Tax Review.  And if the Indiana Board of Tax Review’s final determination is not to the taxpayer’s liking, then he or she may either petition for rehearing or request judicial review.

            But before considering an appeal of the assessed value, the prudent taxpayer would be well advised to be certain that all property credits and deductions are received.  Available credits and deductions each fall under one of several categories: those relating to homesteads and mortgages, those relating to alternative energy sources, those relating to age and disability, and those relating to veteran status.

            The Homestead Standard Deduction allows each homeowner to deduct from the assessed value the lesser of 60% of the assessed value or $45,000.  Additionally, the Homestead Credit and the Supplemental Homestead Deduction may be available to certain taxpayers.  And the Mortgage Deduction allows the homeowner to deduct the lesser of the balance of the mortgage on the property, one-half of the assessed value of the property, or $3,000.

            Homeowners owning property that has been improved by the addition of certain alternative energy contraptions are entitled to a deduction in the amount of the value of the contraption.  In other words, for purposes of determining the assessed value of the property, the doohickey is disregarded.  The following are eligible for this favored treatment: Solar Energy Heating or Cooling Systems, Wind Power Devices, Hydroelectric Power Devices, and Geothermal Devices.

            Homeowners who are over the age of 65 are entitled to a $12,480 deduction, although this deduction may not be taken in addition to any other deductions except the Homestead Deduction and the Mortgage Deduction.  Also, the Over 65 Circuit Breaker Credit may be available to certain taxpayers.  Homeowners who are blind or disabled are entitled to a $12,480 deduction.

            Disabled veterans are entitled to a $12,480 deduction against the assessed value of the property.  Veterans with service connected disabilities are entitled to a $24,960 deduction against the assessed value of the property.  And World War I veterans and their surviving spouses are entitled to $18,720 deduction against the assessed value of the property.

            In addition to the foregoing, real property owners will be receiving some relief as a result of the passage of House Bill 1001.  HB 1001 entitles those who pay property taxes in 2009 to receive a credit that “is the amount by which the person’s property tax liability attributable to the person’s: (1) homestead exceeds one and five-tenths percent (1.5%);  (2) residential property exceeds two and five-tenths percent (2.5%); (3) long term care property exceeds two and five-tenths percent (2.5%); (4) agricultural land exceeds two and five-tenths percent (2.5%); (5) nonresidential real property exceeds three and five-tenths percent (3.5%); or (6) personal property exceeds three and five-tenths percent (3.5%); of the gross assessed value of the property that is the basis for determination of property taxes for that calendar year.”  This effectively caps the property tax at these percentages of assessed value.  And, in 2010, the point at which the credit (cap) kicks in will drop by half a percent.  

            Please join me next time for: Gift and Estate Taxed or Bilked, Bamboozled, and Bushwhacked.