Learn About the Caps
What are the Property Tax Circuit Breaker Credits, a.k.a. Tax Caps?
Indiana’s Circuit Breaker law was enacted in 2008 and began to phase-in with taxes payable in 2009. IC 6-1.1-20.6 says that taxpayer credits (Circuit Breakers or Tax Caps) will be fully implemented in 2010. IC 6-1.1-20.6 states that:
"A person is entitled to a credit against the person's property tax liability for property taxes first due and payable after 2009. The amount of the credit is the amount by which the person's property tax liability attributable to the person's:(1) homestead exceeds one percent (1%);
(2) residential property exceeds two percent (2%);
(3) long term care property exceeds two percent (2%);
(4) agricultural land exceeds two percent (2%);
(5) nonresidential real property exceeds three percent (3%); or
(6) personal property exceeds three percent (3%);
of the gross assessed value of the property that is the basis for determination of property taxes
for that calendar year."
Since its adoption, Indiana’s State Constitution has called for an equal rate of assessment and an equal rate of taxation. This means that in addition to the assurance of uniform and equal assessment practices, taxpayers paying for the same services should have the same tax rates. Many believe that the unequal 1-2-3 Circuit Breaker Credits (Tax Caps) provide preferential treatment to homeowners, in particular, over other taxpayers and interfere with the "uniform and equal" clause in Indiana’s State Constitution.
To ensure that the statutory tax caps are constitutional, a resolution to amend Indiana’s State Constitution has now passed two separately elected sessions of the Indiana General Assembly which is required so that Indiana’s State Constitution can be subjected to a statewide voter referendum. If supported by one more voter that opposes the ballot question, the language of the resolution will be placed into Indiana’s Constitution.
Indiana’s Circuit Breaker Credits (Tax Caps) provide relief to taxpayers, but result in a loss of revenue to local governments. The Legislative Services Agency has done extensive studies showing the loss to local governments across Indiana. Reports are now available that show how many dollars of relief various types of taxpayers will receive and how many taxpayers within each class of property will receive relief.
Contrary to perception, only a small percentage of homeowners will see relief from the Circuit Breaker Credits (Tax Caps). Taxpayers should also be aware that the caps are tied to assessed value, so as your assessment is adjusted due to annual trending your tax bill is not "frozen" but will continue to climb.
- SB 253 authored by Senator Kenley sets out the ballot language for the November 2010 referendum.
- It passed the Senate on Feb. 2nd, but was not heard in the House.
- The ballot language was added to HB 1086 which is a "Christmas Tree" tax bill.
The results are in! See how Agriculture is treated by the 1-2-3 Circuit Breakers compared with other classes of property. See the winners and losers...farmland receives less than 1% of the relief statewide:
Find the impact of 1-2-3 Caps / Circuit Breakers across the state. Caps / Circuit Breakers save some taxpayers money, but not all. They conversely cause a loss of revenue to local units of government impeding their ability to provide services. Access a Legislative Services Agency report that was updated in October 2009:
Lots of great information can be found in the more detailed analysis and explanation of the impact of the 2008 Tax Reforms from 2007 to 2009 – 123 Caps / Circuit Breakers included. Look for changes to levies paid by agriculture on page 2 of each county’s report prepared by Legislative Services Agency: