Last year Indiana homeowners were hit with property tax bill increases averaging 17 percent, an extraordinary increase. Will it happen again in 2024? Let’s compare 2023 to what we know about 2024 so far, and take a guess.
The pandemic economy caused home values to spike in 2021. Low mortgage rates and people’s desire for added living space increased demand. Supply was limited by lagging home construction. Home prices rose 14 percent. County assessors captured those higher values in their 2022 assessments. Gross assessed values rose 16 percent. Those values were used for tax bills in 2023.
Home prices continued to rise in 2022, before higher mortgage rates had their effect. The average increase was 16 percent. We don’t have statewide data for gross assessed values for 2024 yet, but the increase could be 10 to 12 percent, less than last year’s rise.
Taxes are based on net assessed value, which is the gross minus deductions. For taxes in 2023, the net assessed value of homesteads rose 21 percent, even more than the 16 percent gross rise. That’s because the $48,000 standard homestead deduction remained the same while assessed values increased. The remainder after the deduction increased even more, in percentage terms. Total net assessed value for all property—including rental housing, farmland and business property—rose 15 percent.
Indiana’s Gateway system has already reported net assessed values for 2024. For all property, net assessments will rise 6 percent, less than half of last year’s increase. The statewide increase for homesteads is just 4 percent, way less than last year’s 21 percent. The main reason is a policy change made by the General Assembly. Legislators increased the supplemental homestead deduction from 35 percent to 40 percent of assessments after the standard deduction. It’s a seemingly small change that had a big effect.
Property tax rates are recalculated each year by each local government. The revenue to be collected is the tax levy, which is divided by assessed value to set the tax rate. Indiana places a maximum on each unit’s levy, which increases by a statewide growth rate each year. Last year the growth rate was 5 percent. This year the General Assembly limited that increase to 4 percent.
Despite the maximum, last year the total levy increased by 9 percent. That’s because some levies are outside the maximum levy controls. Debt service to repay borrowing for big projects, and levies passed by referendum, are not under the maximum. Last year those levies increased by about 16 percent.
This year legislators restricted some referendum levy increases to 3 percent. The total levy rise should be smaller than last year, perhaps between 5 and 6 percent.
Last year total net assessed values rose 15 percent, the levy rose 9 percent, so the average property tax rate fell by 6 percent. That’s why homestead tax bills rose less than the net assessed value rise. Tax rates for 2024 have been reported on the Department of Local Government Finance’s website, in the county budget orders. The average rate will fall slightly, by 0.4 percent.
Some homeowners have their property taxes capped by Indiana’s circuit breakers, at 1 percent of their gross assessed values. In 2023 the caps helped a little, because tax bills are based on net assessments, while the caps are based on the gross. Since the net rose more than the gross, more tax bills were limited by the caps.
That won’t happen in 2024. Because of the higher supplemental deduction, gross assessed values will rise a lot more than net assessments. Fewer homeowners will see their taxes limited by the caps. Ironically, homesteads that remain capped will see the biggest percentage increases. They’ll be charged 1 percent of gross assessed value, which will likely see double-digit percentage hikes.
What’s the guess for 2024? The average homeowner should see smaller increases in net assessed value than in 2023. Average tax rates will change little, so tax bills on middle-valued homes should rise 3 to 4 percent. Tax bills on higher valued homes will increase more. Your local tax rate changes will differ from the average, but homeowner tax bills in 2024 should rise a lot less than they did in 2023.
