In a late-night vote, the Indiana Senate approved a property tax bill Monday that will save two-thirds of taxpayers up to $300 on their 2026 property tax bill while local governments and schools will lose more than $1.4 billion through 2028.
Gov. Mike Braun, who campaigned on property tax relief, issued a statement after the Senate approved the bill calling it a “historic” plan to reduce property taxes for most Hoosier homeowners while limiting future tax hikes and making the tax system fairer and more transparent.
“Real property tax relief was a core promise of my freedom and opportunity agenda and with the collaborative leadership of our legislators we are delivering real savings and protections for taxpayers. I look forward to signing the bill as soon as I receive it,” Braun said in the statement.
A Legislative Service Agency fiscal impact report shows that will cut more than $1.4 billion across the state between 2026 and 2028, including $744 million from schools, $61 million from libraries, $451 million from cities and towns, and $403 million from counties. In Lake County, that amounts to $235 million in cuts to schools and governmental units over the next three years, while Porter County will see a loss of $49.6 million.
The Senate passed Senate Bill 1 in a 27-22 vote, with 12 Republicans joining all Democrats to vote against the bill. Sen. Dan Dernulc, R-Highland, voted against the bill; Sen. Ed Charbonneau, R-Valparaiso, voted in favor of the bill. Sen. Rick Niemeyer, R-Lowell, was excused.
Senate Bill 1, which was renamed the local government finance bill, was first presented in the Senate to include the language and formula of the property tax relief that Braun campaigned on. The Senate amended the bill to remove that language, but include other provisions for relief
When the bill was sent to the House, Ways and Means Chairman Rep. Jeffery Thompson, R-Lizton, stripped the bill and inserted language from his House bill 1402. Ultimately, the bill was amended to include portions of the Senate’s amended bill, House Bill 1402 and Senate Bill 518, which requires school corporations to share referendum funds with area charter schools.
Thompson proposed a six-page amendment, named Amendment 36, last week that will result in $1.2 billion of property tax relief over the course of 3 years, which would be accomplished by the amendment shifting the standard deduction credit to 10% or no more than $300, he said.
“Two-thirds of homeowners in 2026 will receive a bill less than they received in 2025,” said Sen. Travis Holdman, R-Markle.
Holdman, who authored Senate Bill 1, went over other elements included in Senate Bill 1, which includes school referenda to be held during general elections and a one-year “cooling off period” after a referendum project is paid off, eliminates the 30% floor for business personal property tax and property tax credits for those 65 years old and older and veterans, Holdman said.
The local income tax, beginning in 2028, will decrease from 3.75% to 2.9%, Holdman said. The 2.9% has to be allocated as follows: 1.2% for county general revenue, 0.4% for EMS and fire departments, and 0.2% for townships and libraries, he said.
“I think there are expenses that cities and towns and county governments have that they could trim their budgets. We’ve found in state government and at the federal level there’s a lot of contracts that have been met that aren’t being utilized. I think there needs to be a review of all expenditures at the local level to make sure that they’re spending their dollars wisely,” Holdman said.
If local officials realize they need their current level of funding, Holdman said they could raise their local income tax. But, Holdman also advised against that.
“Just because you don’t receive as much in property tax, doesn’t mean you have to backfill all of that with income tax. You have an opportunity to become more efficient and to cut your budgets and do what you’ve got to do to get by with less,” Holdman said.
Sen. Fady Qaddoura, D-Indianapolis, said schools and local governments, which use property tax dollars for services like fire, police, public works, and others, will see a decrease of $1.4 billion.
Holdman disagreed with that characterization. He said that local governments will still receive an increase in funds year over year through 2028, but they won’t receive the same amount in tax dollars if the property tax system remained the same.
“They will not lose money from one year to the next. They will not receive as much money as they would have under current law, but the large, large majority of schools and municipal governments and counties would receive more in 2026 than they did in 2025, more in 2027 and more in 2028,” Holdman said.
Sen. Rodney Pol, D-Chesterton, said while Senate Bill 1 doesn’t state that local governments have to increase the income tax, it will force local governments to find other ways to fund essential services.
“You’re putting them between a rock and a hard place,” Pol said.
Senate Bill 1 has “multiple poison pills” within it, Pol said, and will force local governments and schools to make difficult decisions “at a time where things are just uncertain as is.”
“We forced too much into one bill,” Pol said.
Sen. Andrea Hunley, D-Indianapolis, said she would’ve liked the Senate Bill 518 portion of the bill to be stripped out because “taking money from one of our systems that is underfunded and giving it to another system that’s underfunded” isn’t the way to fund education.
Sen. Linda Rogers, R-Granger, said the Senate Bill 518 portion of the bill was “significantly” abbreviated in Senate Bill 1 and the sharing of funds doesn’t start until 2028.
“What this is is fairness. The money follows the student,” Rogers said.
Sen. Shelli Yoder, D-Bloomington, said while property tax relief is a worthy goal, Senate Bill 1 doesn’t provide relief but proposes “a mixed bag.”
“It is dressed up as a lifeline, but it is going to drag our communities under,” Yoder said. “What we started with as a bill to provide relief to struggling Hoosiers has turned into a calamity for communities.”
Holdman said Senators had to “take a deep breath.”
“We need to realize that two-thirds of our homeowners will pay less in 2026 than they did in 2025,” Holdman said. “Many of the provisions of this bill do not take effect for two more years, so we have time to find fixes if we find there is a need for that.”
akukulka@post-trib.com
