Jun 24, 2025, 09:47 by INFB Marketing Team
Enrolled Senate Bill 1, which contains sweeping changes to property tax and local income structure, was a major priority for Indiana Farm Bureau during the 2025 session of the Indiana General Assembly.
The bill, which was signed by the governor April 15, increases the capitalization rate in the farmland formula from 8% to 9%. However, that change will sunset in 2027. For the next two years, farmland owners will see a reduction of about 11% from their 2025 tax bills or 16% reduction from what their bills would have been in 2027 if the law wasn’t changed.
While this will provide relief to Hoosier farmers on their real property taxes for taxes in pay 2026 and pay 2027, taxes on other agricultural farm buildings and permanent structures, are expected to increase somewhat due to shifts within the tax base. Those shifts will differ in each county depending on the mix of property.
ESB 1 also phases in a new assessed value deduction for farmland. Beginning with taxes payable in 2026, all farmland assessments will receive a phased-in deduction to their taxable value that will reach 33.4% by taxes payable in 2031.
In comparison, homeowners will see a phase-in deduction that reaches 66.7% by 2030. The combination of these deductions from taxable value will result in the shifting of tax burden back and forth.
“Indiana Farm Bureau’s continued engagement with legislators as these changes unfold will be critical,” said INFB President Randy Kron.
“While INFB appreciates the General Assembly providing our members with some limited tax relief, it is not the long-term solution we have been advocating for,” Kron added.
INFB is committed to returning to the Statehouse in 2026 and 2027 to work with legislators on crafting a more comprehensive and sustainable solution.
In summation, ESB 1 will have the following impact. For farmland real property, members will see statewide savings of $115.8 million over the next three years.
For infrastructure classified as “other agricultural” (barns, grain bins, etc.), members will see statewide increases of $63.2 million over the next three years.
Good news for a large number of farmers came in the Department of Local Government Finance (DLGF) agency bill, HEA 1427. It increased the “de minimis” exemption from what was included in ESB 1 from $80,000 to $2 million acquisition cost. For all business personal property (BPP), HEA 1427 increases the exemption by county from $80,000 to $2 million in pay 2026 and thereafter. This exemption means that if a business has less than $2 million for pay 2026, they will need to file a BPP return once in 2026. But going forward, they will not have to file if the total acquisition cost of their machinery does not exceed $2 million.
While INFB supported a push to eliminate the 30% floor for all business personal property, the perception was that the impact to local government would be too significant. However, some progress was made. The 30% floor will not apply to equipment purchased after Jan. 1, 2025. Equipment new to a farm operation that has never been used by the operation will not be subject to the 30% floor and will be allowed to fully depreciate.
The DLGF will be writing new rules and creating new forms to account for both personal property changes. INFB will keep members updated as those materialize.
