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Senate Enrolled Act 1, passed during the 2025 legislative session, makes significant, bottom-line changes to Indiana’s property tax system. Due to its complexity, the full impacts of its changes are slowly becoming known, said Katrina Hall, Indiana Farm Bureau senior director of policy strategy and advocacy.

“SEA 1 is a sweeping reform – it is really a complete change – of the property tax and local government funding system. It is turning it on its head and realigning the goals of the system,” Hall said.

While some changes begin in 2026, others will phase in through 2031. This is intended to give legislators a little breathing room while they take a longer look at the problem and make refinements, Hall said.

The changes start next year. “Farmers get tax relief on farmland on a two-year temporary basis, but we’re continuing to work to modernize the formula for the long term,” she said.

Effective immediately for taxes to be paid in 2026 (also known as “pay 2026”) is a homestead credit, which will be either 10% of the bill or $300, whichever is lower. “Our members are homeowners, so that offers immediate relief,” Hall explained.

Effective for pay 2027 are changes in business personal property:

• Increases the de-minimus exemption “acquisition cost” to $2 million.
• No 30% floor on new (new to the taxpayer) equipment after Jan. 1, 2025. The Indiana Department of Local Government Finance will adopt rules on how to file for “new” equipment.
• 30% floor stays in place for existing equipment.

This means, Hall explained, that when members file their personal property returns in the spring, they will look at what they owned on Jan. 1, 2026, and will file a new kind of return. If the total acquisition cost is under $2 million, they will not have to pay any business property tax. INFB is funding research and hopes to have more definite information soon on the impact to agriculture.

While the new homestead credit and $2 million de-minimus exemption provide immediate relief, the 30% floor relief for new equipment is more gradual.

For pay 2028, SEA 1 begins a sweeping realignment of the property tax base for property in the 1% and 2% circuit breaker classes. As farmland taxes are calculated through 2031, a new assessed value deduction will gradually increase. By 2031, farmland will have a one-third deduction.

“Those are big deductions for farmland and everything else in the 2% circuit breaker class like rental residential and apartments. But homesteads in the 1% category will see even larger deductions. By 2031, homesteads will have a two-thirds deduction,” Hall explained.

“The tax base on all fronts is shrinking except for the 3% circuit breaker class – farm buildings, commercial and industrial property,” she said. “There will be shifts upon shifts. The question is, how does everybody end up, how do farmers’ tax bills end up? We are investigating how those shifts work out in each county.”

The final piece in the restructuring equation is that Indiana is shifting to a rate control system rather than a levy control system.

According to the website IN.gov, a tax rate is the percentage used to determine how much a property taxpayer will pay. A levy represents the total amount of funds a local unit of government may collect on a tax rate. In other words, IN.gov says, the levy is a cap on the amount of property tax dollars a local government is allowed by law.

When the legislation is complete, all units of local government of the same type will have the same tax rate, Hall said, and there will be a tax rate structure rather than a levy rate structure.

“But that structure has not been adopted yet. The big question for the 2026 session is, what will that look like?”