Indiana property taxes are a huge part of retirement planning—even if your home is completely paid off. In the Hoosier State, tax rates and exemptions can vary widely based on local rates. Knowing how to calculate your property taxes and what exemptions are available for retirees can make a big difference in how you manage finances and plan for your future.
This guide offers practical tips on Indiana property taxes during retirement, helping you stay informed and prepared as you enjoy your golden years.
Determining Indiana Property Tax Rate
According to the Tax Foundation, the average median Indiana property tax rate is 0.84% of housing value for homes where the owners reside in the property. Knowing how Indiana property taxes are structured can help you plan better during retirement. Each county in Indiana may have different tax rates, so it’s important to know the specific rate where you live.
Urban areas may have higher rates than rural areas due to the provided services and public infrastructure. Knowing the specific rate in your county helps you estimate your annual property tax bill more accurately.
Indiana's property tax rate generally consists of a base rate set by the state and additional rates from local taxing units like cities and schools. You can check property tax rates in Indiana by county on StatsIndiana. This can make it difficult to decide right off the bat how much you owe in taxes. You could use an online Indiana property tax calculator to help with this or work with a local certified tax professional to help with this.
Explore Indiana Property Tax Exemptions for Senior Citizens
Luckily for retirees, there are several Indiana property tax exemptions that can help reduce the tax burden. These exemptions are designed to lower the taxable value of your property, which means you pay less in property taxes.
Applying for these Indiana property tax exemptions can make a big splash in your retirement budget. Reviewing the available options and seeing which ones apply to your situation is a good idea. Work with a tax professional or financial planner to see which you can apply for.
1. Over 65 Deduction Breaker Credit
For retirees, it’s worth looking into the Over 65 Deduction Indiana property tax exemption.
The Over 65 Circuit Breaker Credit helps limit how much your property taxes can increase annually. With this credit, your taxes won’t increase by more than 2% annually.
Let’s say your property tax last year was $1,000. With this credit, your year’s tax bill can’t be more than $1,020—a 2% increase.
To qualify for this credit, you need to meet these requirements:
- You turned 65 or older by December 31 of the previous year.
- You’ve received the homestead standard deduction on the property this year and last.
- Your adjusted gross income is $30,000 or less; if you’re married, your combined income with your spouse is $40,000 or less.
- The portion of your property used as your home (the homestead portion) has a gross assessed value of $200,000 or less. You can find this value on your tax bill or property record.
- You own the property, buy it on a recorded contract, or have a beneficial interest in it.
This credit ensures that even as property values and taxes rise, your tax burden increases at a manageable rate.
2. Over 65 or Surviving Spouse Deduction
The Over 65 or Surviving Spouse Deduction helps lower your property taxes by reducing the assessed value of your home. Property owners get a reduction of $14,000 or half of the property’s assessed value, whichever is less. A lower assessed value means you’ll pay less in property taxes, lowering your property tax liability.
You need to meet these requirements to qualify for this Indiana property tax deduction:
- You must have turned 65 or older by December 31 of the previous year.
- If your spouse was 65 or older when they passed away, you can also qualify if you are 60 or older and haven’t remarried.
- You must own the property or have been paying on a recorded contract for at least one year.
- The property must be your primary residence.
- Your combined adjusted gross income (including your spouse’s income and anyone else who owns or rents the property) must be $40,000 or less for the previous year.
- The assessed value of your home must be $240,000 or less.
- You can’t receive any other property tax deductions except for the mortgage, homestead standard and supplemental deductions, and the fertilizer storage deduction.
Review Other Deductions for Property Taxes in Indiana
Indiana offers several property tax deductions, especially for veterans:
- Disabled Veteran Deduction: Veterans with a service-connected disability of 10% or more may qualify for a deduction on their property taxes. The amount of the deduction depends on the degree of disability and the assessed value of the property.
- Totally Disabled Veteran or Veteran over Age 62 Deduction: Veterans who are completely disabled or are 62 years old and have a disability rating of at least 10% may be eligible for an additional deduction.
- Veterans' Mortgage Deduction: This is for veterans with a mortgage on their property.
There is also a deduction for permanently disabled persons who own their homes. You must provide proof of your disability, such as your Social Security Administration disability award. This deduction reduces the assessed value of the house by a set amount. Remember that the deduction amount can vary depending on local county regulations.
What Is the Tax Break for Retirees in Indiana?
In Indiana, retirees can benefit from several tax breaks. There are also deductions for income from pensions and Social Security, which can help reduce your state income tax. One of the primary ones is the Over 65 Deduction, which reduces the assessed value of your home. A lower value leads to lower property taxes.
How Can I Reduce My Property Taxes in Indiana?
You can reduce your property taxes in Indiana by applying for exemptions like the Homestead Deduction, the Over 65 Deduction, or deductions for veterans or disabled individuals. If you think your property’s assessed value is too high, you can appeal to lower your tax bill.
Prepare for a Headache-free Retirement
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Tax loss harvesting is a strategy that may help minimize the amount of current taxes you have to pay on your investments by choosing to sell an investment at a loss. It is only appropriate for certain taxpayers in certain scenarios. Please review your retirement savings, tax, and legacy planning strategies with your legal/tax advisor before attempting a tax loss harvesting strategy.
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
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