Indiana uses an assessment standard for property taxes called “market value in use.” The assessment is the value of the property decided by the county assessor for tax purposes. It’s a prediction of what the house could sell for, on the open market, if it continues in its current use. How much would a stranger pay for your house, if they want to live in it, and not convert it to some other purpose?
Prior to 2003 Indiana used a different standard. The Indiana code said that assessments were not based on market value. They were the value determined under the rules established by the state. The only way for a homeowner to know if their home was assessed correctly was to study the rules and assess the house themselves.
In 1998 the Indiana Supreme Court threw out that system, in the Town of St. Johns decision. In 2003 Indiana reassessed property based on market value in use for the first time.
How can you tell if your house is assessed correctly, under market value in use? Ask yourself, would I sell my house for what the assessor says it’s worth? Perhaps you answer, Yes! But who would pay that much for this dump? Or you may answer, if the assessor thinks it’s worth that much, let them buy it! If those are your answers, your house may be overassessed. Your assessed value is too high.
On the other hand, if you answer, That’s an insult! My lovely home is worth much more than that. Or if you intend to sell, you answer, Ridiculous! Don’t be telling buyers it’s worth so little. If those are your answers, then your house is probably underassessed. Your assessed value is too low.
That’s the advantage of market value in use. The taxpayer can audit the assessor. Most homeowners have some idea of what their homes might sell for, from real estate listings or talk in the neighborhood. If the assessment is far different from that number, then there’s a problem. The assessor can be held accountable.
In fact, assessors are tested every year to make sure their assessments are accurate, with a “sales ratio study.” Assessments are divided by the prices of properties that actually sold during the year. If the median or middle ratio of assessed value to sales price is near one, then assessments are accurate. The oversight agency, the Department of Local Government Finance, cuts the assessors some slack, approving studies with ratios between 0.9 and 1.1. Accuracy within 10 percent is required.
Results of ratio studies sometimes show problems with vacant land assessment, and assessment of commercial and industrial properties. But for residential improved property — homes — almost every county meets the standard almost every year.
But maybe your assessment is wrong. You can appeal. There’s a form to file (of course) indicating your intent to appeal, and asking for evidence. First there’s a discussion with the county assessor’s office, and many problems are solved right there. If not, the case will be considered by the Property Tax Assessment Board of Appeals (PTABOA). And yes, it’s really called the “peeta-bowa”. If still not satisfied, the next appeals are on the state level, to the Board of Tax Review, the Tax Court, or even to the Indiana Supreme Court, but that’s pretty rare.
On the whole assessors do a good job of valuing homes for tax purposes. Unfortunately, that’s been a problem. The selling prices of homes have been rising rapidly in Indiana, and everywhere else, since the pandemic. An all-transactions index of home prices for Indiana rose 14 percent in 2021, 16 percent in 2022, 7 percent in 2023 and 6 percent in 2024. In the 30 years prior to that the index had risen more than 6 percent only once, in 2018. Since assessors do their jobs so well, home assessments have risen rapidly too.
Indiana’s property tax system didn’t anticipate such an event. The result was some large increases in property tax bills. That’s the reason for the big policy change passed by the General Assembly this year.
Home price increases have been slowing since mid-2024. If that continues, assessors will make sure that home assessments rise more slowly too.
