Commercial Taxpayers May Not Be Fully Benefitting from Property Tax Caps in Indiana

Henry Hamilton, Director, Property Tax Commercial
317.639.2371 |

First introduced in a 2008 property tax reform—and later added to the state constitution in 2010 via voter referendum—the Indiana property tax was set at a cap limit amount of 1% of property values for homesteads (owner-occupied), 2% for other residential property and farmland, and 3% for all other property.*

These caps provided a dual benefit to taxpayers. All taxpayers benefit from the predictability of the caps, and taxpayers who would otherwise pay above the cap, receive direct property tax relief in the form of a tax credit (known as a “circuit breaker credit”) that reduces the bill to the capped amount. The commercial property is subject to a 3% maximum tax bill based upon the property’s assessed value. The proportion of tax is a fixed value based upon the cost of operating local government (i.e., “tax burden”). This “tax burden” is distributed among the taxpayers in a given district based upon the assessed value of the property in question. A property’s “assessed value” is based on a specific formula for the type of use of the particular structure. This is supposed to reflect the property’s “market value in use,” but quite often, the formula can produce a value much higher than the market for the particular property would suggest. This excess value causes tax bills to dramatically increase. Recently, Ryan’s local experts have assisted a client in saving more than $17,000 annually. It is imperative to actively monitor annual assessments, and Ryan’s local experts are readily available to assist and determine if an appeal should be filed.

*Voter-approved school referendums fall outside of cap

“Ryan looked at the overall square footage being assessed for each cap type (commercial vs. residential) and compared the actual use square footages provided by the client to ensure the percentages were correct. This combined with a review of the tax bill and cross reference with the correct cap rate resulted in savings realized. These overvaluations could be affecting commercial taxpayers across the state.”