Indiana Tax Law Changes

​ In the 2025 legislative session, Indiana’s general assembly passed a new bill (“SEA 1”) that will change many tax laws in the coming years. This new law many different areas of tax law but will affect homeowners and businesses the most. One big change is the business personal property de minimis exemption change. Previously, business personal property up to $80,000.00 was tax exempt, but this new bill raises that threshold up to $2,000,000.00 by 2026. Another new change is the personal property floor adjustment. Prior to this new law, there was a 30% depreciation floor on business personal property, but now this depreciation floor has been completely removed. Practically, this means that you can now depreciate business personal property all the way up to its original value.

​SEA 1 will slowly phase out the Indiana standard homestead deduction over the next five years. To offset the phase–out of that deduction, the supplemental homestead deduction is being raised gradually over the next five years up to 66% of the homestead property. The bill also gradually phases in a deduction that can be applied to properties that are eligible for the 2% circuit breaker credit. This deduction will rise all the way to 33% of the assessed value of the property by 2031.

​This bill also made changes to local government finance taxes. It has raised the ceiling for county government income taxes to 2.9%, up from 2.5%. This does not necessarily mean that the county you live in has raised its local income tax, only that it may now raise it up to 2.9% if locally approved. It also provided local municipalities the power to impose income tax on residents living within the municipality up to 1.2. The last new local tax that this created was a local income tax given to counties to make up for the lost tax revenue from the new homestead taxation plans. This “replacement” income tax is only in effect until 2028 and is limited to 0.3% of income.

If you have any questions about these new tax laws and how they could affect you, please contact McNeelyLaw LLP by calling (317)825-5110.

Disclaimer: This McNeelyLaw LLP publication should not be construed as legal advice or legal opinion of any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer on any specific legal questions you may have concerning your situation.