Tax Caps: Impact on Taxpayers
In 2010, Indiana voters amended the state's constitution by incorporating language on property tax caps. Known as the Circuit Breaker tax credit, these tax caps place a limit on property tax bills based on the gross assessed value of the property.
In short, if your tax bill exceeds the tax cap limit, the "circuit breaker" will be applied. You will enjoy the tax savings, while local government units will lose the anticipated revenue.
The tax cap thresholds are:
- Homesteads: 1%
- Other residential property; agricultural land: 2%
- All other property, such as businesses and personal property: 3%
How It Works
Let's say you own a home. All your property is classified as a homestead, which is your principal place of residence and up to one acre of immediately surrounding land. If your homestead is assessed at $180,000, your property tax will cannot exceed $1,800 (unless an important exception applies; see below).
Now, let's say you own a home on five non-farmed acres. The homestead portion will be capped at 1% of its gross assessed value, while the remaining four acres will fall in the 3% category (unless the exception applies).
How much does the tax cap save taxpayers? Below is a look at tax bills, payable in 2021, for three homesteads with the same assessed value but in different areas of Porter County with different tax rates. (Calculations include the homestead and mortgage deductions; figures are rounded.)
|Assessed Value||Tax Before Tax Cap||Does Tax Exceed Tax Cap?||Tax|
As you can see, the Hebron homeowner saved about $485 due to the tax cap, while the Portage homeowner saved $307. The Washington Township homeowner's tax bill didn't "hit" the tax cap limit and so no circuit breaker credit was applied.
An important exception to the Circuit Breaker law involves taxes approved through a voter referendum. If you have a tax rate established through a referendum, this rate is calculated on your tax bill without the Circuit Breaker applied. In Porter County, voter-approved rates are in effect for the Duneland, Valparaiso, Boone Township, and Union Township school corporations.
In general, this exception means that taxpayers may still see a savings on their tax bills due to the tax caps, except for the taxes approved in a referendum. In the example above, the Hebron tax includes a school referendum tax that was not subject to the tax caps.
For more information on how the tax caps affect local government, see "Tax Caps: Impact on Tax Units."