Indiana Lawmakers Proposed Replacing Property Tax Credits
A new plan would shift funding for primary residence tax breaks onto local income taxes over five years.
Updated on Sept. 30, 2026 in Taxes
Live Poll
Would you support replacing homestead property tax credits with higher local income taxes?
State lawmakers recently introduced a proposal to phase out homestead property tax credits in favor of higher local income taxes. The transition is intended to cover funding gaps for primary residences across the state.
Why it matters
The shift aims to address local funding requirements while balancing the reality of $54 billion in outstanding local debt that relies on current tax structures. Lawmakers are exploring these changes as they prepare for the upcoming two-year budget cycle.
The proposal includes a five-year phase-in period, starting with a 20 percent credit and reaching 100 percent of current homestead tax levels. This plan seeks to replace $40 million in credits in Kosciusko County alone.
The players
State Sen. Ryan Mishler
An Indiana state senator involved in drafting the new property tax credit replacement plan.
State Rep. Craig Snow
An Indiana state representative who presented the proposed tax shift at a town hall meeting.
State Sen. Chris Garton
An Indiana state senator participating in the legislative effort to modify local property tax funding.
The details
Under this plan, counties would be required to increase local income taxes to generate the revenue necessary to support taxing units. The proposal specifically targets primary residence property tax bills for these credits. State officials have criticized prior budget growth forecasts from consultants while emphasizing that eliminating property taxes entirely is not realistic due to existing local debt obligations.
Timeline
Tuesday: Lawmakers unveiled the property tax proposal in Warsaw.
January: Lawmakers convene to begin two-year budget work.
Over five years: The homestead credit replacement plan will be phased in.
Money Landscape
This proposal follows a pattern set by Senate Bill 1, which was passed two years ago to address state tax structures. It represents a shift in the ongoing effort to balance property tax burdens against the $54 billion in total local debt across the state.
Homeowners should monitor how this phase-in impacts their total annual tax obligations as the credit structure shifts from property to income-based funding. Consult with a qualified tax professional to understand how potential local income tax increases might affect your specific household budget.
The takeaway
This proposal highlights a major shift in how local services are funded by moving costs from property owners to income tax payers. Residents should track the upcoming legislative budget sessions in January to see if these changes proceed to a final vote.
What happens next
Lawmakers are expected to convene in January to begin working on a two-year budget.
Further reading
For more information on how legislative changes affect your household, visit our Taxes section.
Live Poll
Would you support replacing homestead property tax credits with higher local income taxes?
