A new Indiana property tax law could impact how much multifamily property owners pay in property tax over the next several years. But while the headline benefit looks promising, the actual savings may not be as straightforward.
Background: Senate Bill 1 and the New Deduction
Senate Enrolled Act 1 (2025) added a new section to the Indiana Code—IC § 6-1.1-12-47—that introduces a phased-in deduction from assessed value for “eligible property” subject to Indiana’s 2% constitutional property tax cap. For multifamily owners, that means their properties may qualify for an automatic reduction in assessed value starting in 2025.
Here’s how the deduction schedule rolls out:
- 6% in 2025-pay-2026
- 12% in 2026-pay-2027
- 19% in 2027-pay-2028
- 25% in 2028-pay-2029
- 30% in 2029-pay-2030
- 33.4% in 2030 and beyond
Importantly, the law states that no application is required—county auditors are directed to apply the deduction automatically to eligible properties. Multifamily owners should see this deduction on their 2025 payable 2026 tax bill in the spring of 2026.
So What’s the Catch?
At first glance, the deduction appears to provide immediate tax relief by lowering your property’s net assessed value—that is, the gross assessed value minus any applicable deductions. But in reality, the value of the deduction depends on how the deduction is implemented.
Because the legislation is new and has no historic implementation, it’s unclear how it will function in practice. However, based on how similar deductions (like tax abatements) are treated under Indiana law, it’s likely the deduction will be applied using the same basic framework.
How Might It Work? Think Abatement Mechanics
Under existing tax abatement law, the actual tax liability is calculated by comparing two amounts:
- The net AV (after the deduction), taxed at the full local tax rate, and
- The gross AV, taxed at the applicable maximum allowed under the cap (2% for rental properties plus voter approved referendum spending).
The taxpayer pays the lower of those two numbers. As applied to Cap 2 properties (multifamily), if the local tax rate is above 2%, the 2% tax rate cap could produce the lower liability.
For example, if a property has a gross AV of $10 million, and the local tax rate is 2.2%, the cap limits taxes to $200,000 (2% of gross AV). A 6% deduction might reduce the net AV to $9.4 million, but at 2.2%, that would still generate a tax bill of $206,800—higher than the maximum tax liability allowed under the cap. So the cap still controls, and the deduction has no impact. As such, the deduction reduces the actual tax bill only when the net AV—taxed at the full local tax rate—results in a tax liability below what one would owe under the cap.
Alternatively, if a property is in a taxing jurisdiction where the local tax rate is below 2%, a property should see immediate relief in tax liability.
What Multifamily Owners Should Watch For
- Short-term benefit. Depending on the local tax rate, early-stage deductions (6%, 12%) may not reduce your actual tax burden.
- Longer-term value improves. As the deduction increases, the benefit may become material, depending on AV growth and your local tax rate.
- Implementation remains speculative. As of now, no Indiana assessor or auditor has confirmed how this law will be applied. The mechanics discussed here are based on how similar deductions work but are not yet confirmed.
Bottom Line
Senate Bill 1 offers the potential for tax savings—but don’t bank on immediate reductions. Until the deduction is large enough to drop your tax below the 2% cap, it may not produce a real difference in your bill. And because the law is new, there is still a degree of guesswork involved in how it will be rolled out.
If you’d like to understand whether—and when—SB 1 will lower your tax bill, we can help model your specific properties and local tax rates. Reach out to our team to discuss tailored projections.