On Tuesday, Sept. 29, three Republican state legislators pitched a plan in Warsaw, Indiana, to take the property tax bill on owner-occupied homes down to zero and pay for it with higher local income taxes. It is a pitch. We found no filed bill, and nothing changes on your 2027 tax bill because of it.
We are writing about it now because it would split Indianapolis homeowners, renters and landlords three different ways. Here is what was proposed, what current law already does, and what the numbers look like on a median-priced Marion County home. For the wider picture of what is moving in the city, see our Indianapolis development roundup.
What the three legislators proposed
The Indiana Capital Chronicle reported that about 300 people attended, and that the pitch was headlined by Sen. Ryan Mishler (R-Mishawaka), who chairs the Senate Appropriations Committee. Rep. Craig Snow (R-Winona Lake), vice chair of the House Ways and Means Committee, and Sen. Chris Garten (R-Charlestown) joined him. Garten is set to become the next Senate president pro tem after the November election. InkFreeNews counted 230 people at the same event, so treat the crowd size as roughly 230 to 300.
Mishler said eliminating all property taxes is not realistic because of $54 billion in local debt backed by property tax revenue. His alternative is a credit for owner-occupied homes that starts at 20% and phases up to 100% over five years. Local governments would raise their local income tax to replace the money.
At 100%, Mishler said, a homeowner would still get a bill, but it would read zero. The exception is any property tax a community approved by referendum, such as extra school funding. He also said a credit, unlike an exemption, avoids shifting the burden onto agricultural, commercial and investment properties.
What nobody has published yet
We found no bill text, no statewide fiscal estimate, no list of which counties have room to raise income taxes, and no Marion County figure. Mishler said all but 14 counties have the capacity now. Coverage we read did not say whether Marion County is one of the 14. Snow said getting to a new system will take time, "three or four years." Any bill would come up in the 2027 session, which starts in January.
A separate idea from Rep. J.D. Prescott would eliminate all property taxes and extend the 7% sales tax to services. That is a different plan with a different sponsor.
What Indiana law does right now
Senate Enrolled Act 1 from 2025 is already shrinking homestead bills and shifting how they are calculated. The Department of Local Government Finance (DLGF) memo of May 27, 2026 lists the schedule. The standard deduction is $40,000 for the 2026 assessment date, which feeds bills due in 2027, and it reaches $0 for the 2030 assessment date.
| Bills due in | Homestead standard deduction | Supplemental homestead deduction | Deduction on 2% property (rentals) |
|---|---|---|---|
| 2026 | $48,000 | 40% | 6% |
| 2027 | $40,000 | 46% | 12% |
| 2028 | $30,000 | 52% | 19% |
| 2029 | $20,000 | 57% | 25% |
| 2030 | $10,000 | 62% | 30% |
| 2031 on | $0 | 66.7% | 33.4% |
The supplemental deduction is a percentage of the assessed value left after the standard deduction. Homesteads also get a credit of 10% of the bill, up to $300. The caps still apply on top of all of it: per the DLGF fact sheet, a bill cannot exceed 1% of gross assessed value for a homestead, 2% for residential rental and agricultural land, and 3% for nonresidential property.
The math on a median-priced Marion County home
These numbers are illustrative, not a forecast. Assumptions: a $325,000 house, which matches the MIBOR median sale price for August 2026 in the Indiana REALTORS Housing Hub, assessed at that same $325,000. We used the 2026 certified rate for the Indianapolis Center district, 2.7291 per $100, and held it flat. We left out referendum taxes, and your assessor's value and district rate will differ.
| Same house, bills due 2027 | Tax before cap | Cap | Annual bill |
|---|---|---|---|
| Homestead, current law | $4,200 | $3,250 (1%) | $2,950 after the $300 credit |
| Homestead, 100% credit as pitched | n/a | n/a | $0 plus any referendum tax |
| Rental, current law | $7,805 | $6,500 (2%) | $6,500 |
Two things stand out. At this rate and price the 1% cap already holds the homestead bill at $3,250, so the deduction phase-down does not change the result in this example. And the same house costs about $3,550 more a year as a rental than as a primary residence.
Under the pitch, the owner-occupant side of that gap goes from about $246 a month to zero. The rental side stays at about $542 a month.
What the swap changes for each household
Homeowners
The bill drops, and a local income tax rise pays for it. Marion County's rate is 2.02% on top of the state's 2.95%, according to the Indiana Department of Revenue's withholding notice. Each extra 0.25 percentage point costs $150 a year at $60,000 of taxable income, $250 at $100,000 and $375 at $150,000.
Whether you come out ahead depends on how far Marion County would have to raise the rate, and nobody has published that. The Capital Chronicle noted that Mishler himself said he would likely pay more in income tax than he would save, because he has downsized his home.
Renters
A renter gets no property tax bill to cut and could pay the higher income tax. Nothing in the pitch lowers a landlord's property tax, so it gives no direct reason for rent to fall. Attendees in Warsaw asked about the effect on renters, and we did not see an answer reported.
Landlords
A homestead-only credit leaves rental property where it is. Your property stays at the 2% cap, and the 2% deduction schedule keeps phasing in. At our assumptions the rental stays pinned at the cap until the 30% deduction arrives with 2030 bills, when the tax before cap falls to about $6,209. That assumes rates and values stand still, which they will not.
Landlords who are individuals or pass-throughs would still pay the higher local income tax. The other effect is harder to size. If owner-occupants carry a lower tax cost than investors on the same kind of house, that could change who wins bidding on starter homes. We have no data on that, and we are not predicting it.
Our investor guide to Indianapolis property taxes covers how rentals are assessed today.
The tradeoffs for local government
Homestead taxes were nearly $4.1 billion, or 38%, of the $10.6 billion in statewide property taxes billed in 2025, per a Legislative Services Agency report cited by the Capital Chronicle. Replacing that with income tax moves the funding from home values to paychecks. One Warsaw attendee recalled 21% unemployment in 2007 and 2008 as the risk of leaning on income tax.
Before the event, the Association of Indiana Counties called the backfill a huge concern for local governments. Kosciusko County Commissioner Sue Ann Mitchell called a straight shift "smoke and mirrors" without other adjustments. The people proposing it answered that local officials should justify why they need more money.
What I would tell a client
Most of my work is helping homeowners move from a starter home to a forever home, along with investors, first-time buyers and house hackers. Here is what I'd do today, whatever happens with this plan.
- Budget on current law. Do not build a hypothetical tax cut into an offer or a payment estimate. Use the real bill for the house, and do not assume the seller's deductions carry over, since a change in title can end a homestead deduction.
- File the homestead deduction. Anything that targets owner-occupied homes will need a way to find them, and the homestead filing is how counties do that today. The 1% cap also requires the deduction.
- Keeping your starter home as a rental? The homestead deduction ends when you stop living there, and you have 60 days to tell the auditor. Since July 1, 2026, HEA 1210 makes back taxes plus a 10% penalty mandatory for anyone who skips that notice.
- Underwrite rentals at the 2% cap. Run the numbers on the full rental bill, not the seller's homestead bill. Our guide to Marion County property taxes for buyers shows how the homestead filing works.
- Watch the 2027 session. It starts in January. Bill text, a fiscal note and a county-by-county income tax estimate are what would tell you whether this helps or hurts you.
Want us to run your own numbers, with your real assessed value and your district rate? Grab a coffee with me or the team and bring the tax bill.
Cover photo: Daniel Schwen via Wikimedia Commons, licensed CC BY-SA 4.0.
Frequently asked questions
Quick answers from this guide.
Is Indiana eliminating property taxes on homes?
No. Three legislators pitched the idea in Warsaw on Sept. 29, 2026, and the Indiana Capital Chronicle reported it as a proposal. We found no filed bill. Sen. Ryan Mishler said full elimination is unrealistic because of $54 billion in local debt backed by property tax revenue.
How would the Indiana homestead property tax credit plan work?
Per the Indiana Capital Chronicle, Mishler described a credit on owner-occupied homes that phases from 20% to 100% over five years. Local governments would raise their local income tax to replace the revenue. At 100%, the bill would read zero, except for taxes a community approved by referendum.
Would renters pay more under a property tax to income tax swap?
Renters could. Under the pitch, a county that raised its local income tax would raise it for every taxpayer, including renters, and renters get no homestead credit. Attendees in Warsaw asked about the effect on renters, and we did not see an answer reported.
Does the homestead proposal cover rental properties in Indiana?
No. The pitch covers owner-occupied homes only. Rental property stays under the 2% circuit breaker cap, and Mishler said a credit avoids shifting the burden onto investment properties.
What is the Indiana homestead standard deduction for 2026?
It is $40,000 for the 2026 assessment date, which feeds bills due in 2027, and $48,000 for the 2025 assessment date behind 2026 bills. The DLGF schedule drops it to $0 for the 2030 assessment date. The supplemental deduction rises from 40% to 66.7% over the same period.
What are Indiana's property tax caps for homes and rentals?
Per the Indiana DLGF, a bill is capped at 1% of gross assessed value for a homestead, 2% for residential rental property, long-term care property and agricultural land, and 3% for nonresidential property. A property must receive the homestead standard deduction to get the 1% cap.
What is the income tax rate in Marion County, Indiana?
The Indiana Department of Revenue lists a 2026 state rate of 2.95%, falling to 2.90% in 2027. Its withholding notice effective Oct. 1, 2026 lists Marion County at 2.02%.
How long do I have to tell the county when my home stops being my primary residence?
You have 60 days to notify the county auditor once you no longer qualify for the homestead deduction, such as when you rent the house out. Since July 1, 2026, HEA 1210 makes back taxes plus a 10% civil penalty mandatory for someone who fails to notify, according to the DLGF.