Larry DeBoer
Professor of
Agricultural Economics
Purdue University

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Homeowner Property Tax Bills
in 2013

We've got most of the property tax numbers for 2013 now. Let's look at what happened to homeowner tax bills.

Why homeowners and not farmers, landlords or business owners? Because there are more homeowners than any other kind of property owner. Besides, I'm a homeowner and I want to know.

The Legislative Services Agency is posting its annual reports on the property tax by county for 2013. (Disclaimer: I helped.) You can see the reports at http://www.in.gov/legislative/2397.htm. Part of each report looks at homesteads, which are owner-occupied primary residences. You know - that house you own and live in most of the time. LSA's reports show what happened to properties that were homesteads in both 2012 and in 2013.

Homestead property taxes increased by an average of 0.1 percent statewide. That's one-tenth of 1 percent.

In one way, this tiny change is astounding. This is a statewide reassessment year when recalculated property assessments are used to set property tax bills. All the reassessments since 1980 either caused homeowner tax bills to go way up or caused the General Assembly to create new tax breaks to prevent tax bills from going way up.

In 2003, for example, reassessment would have increased homeowner tax bills by more than 50 percent, but the General Assembly passed increases in homestead deductions and credits to hold the rise to 4 percent. The 2013 reassessment did not cause a big homeowner tax bill increase, so the General Assembly did not consider big property tax policy changes.

Trending was the main reason why there was no big tax increase for homeowners. Before 2007, the assessed values of land and buildings, including homes, changed only in reassessment years. When a reassessment year came along, home assessments would jump - and so would homeowner taxes.

Since 2007, though, county assessors have adjusted assessed values every year based on changes in property selling prices. That's trending. In 2013, there was no jump in home-assessed values, so there was no big increase in homeowner tax bills.

In fact, homestead assessments actually decreased. The total assessed value of homesteads, before deductions, dropped by 1.6 percent from tax year 2012 to 2013. This may have been a continued effect of the recession. The assessed values used for taxes in 2013 were set in 2012, based on selling prices in 2011. An index of Indiana home prices fell 1.4 percent from 2010 to 2011. The reassessment may have caught that decline.

Homestead assessed values dropped, so why didn't homestead tax bills drop, too? That was because property tax rates increased by 4.2 percent, on average. The levies of all Indiana local governments rose by 3.7 percent, and the taxable assessed values dropped by 0.5 percent. Rates are calculated by dividing the levy by taxable assessed value, so rates went up.

But if tax rates went up more than homestead assessments went down, why didn't homestead tax bills increase? That was because of tax credits.
Some counties have tax credits for homeowners and other property owners, which are funded by local income taxes. In 2010 and 2011, the state distributed too little income tax revenue to the counties, and in April 2012, the state sent counties a special distribution to make up the difference. Some of that revenue was meant for property tax relief. It was too late to recalculate tax bills in 2012, so that revenue was applied to tax relief in 2013. Local property tax credits were bigger than usual in 2013, by 3-4 percentage points, on average. Homeowners in the counties that have the extra local credits may lose them in 2014.

The tax caps held homeowner tax bills down, too. When tax rates go up, more taxpayers qualify for more tax cap credits. Credits are subtracted from tax bills to bring them down to the property's tax cap level. Tax cap credits for homeowners increased by $37 million from 2012 to 2013. That was enough to knock an extra 2 percent off the average homestead tax bill.

Homeowner tax bill changes varied a lot by county. In 21 mostly small counties, homeowner tax bills dropped by double-digit percentages. In most of the large counties, tax bills increased modestly.

But statewide, the average property tax bill remained steady in 2013.




Writer: Larry DeBoer
Editor: Cindie Gosnell