Quick Answer
Indiana caps how much property tax you can owe based on your home's gross assessed value. For an owner-occupied home (your homestead), the cap is 1% of assessed value; other residential property and farmland are capped at 2%, and most other property at 3%. It's commonly called the "circuit breaker." See our real estate glossary for related terms.
- Also called
- The "circuit breaker" cap
- Homestead cap
- 1% of gross assessed value
- Other residential / farm
- 2% cap
- Commercial / other
- 3% cap
- Set by
- Indiana Constitution & state law
How Indiana's Property Tax Caps Work
Every property in Indiana gets a "gross assessed value" from the county assessor. The caps limit your total annual bill to a percentage of that value, no matter how high local tax rates climb. Owner-occupied homes fall under the 1% cap, second homes and rentals under 2%, and commercial and most other property under 3%.
Because the cap is tied to assessed value rather than a fixed dollar amount, your ceiling rises and falls as your assessment changes. If your calculated bill would exceed the cap, the circuit breaker credit reduces it back down.
The Homestead Deduction Lowers the Base
To get the 1% homestead cap, you have to file for the homestead deduction on the property you live in as your primary residence. That deduction, along with the supplemental homestead deduction, reduces the assessed value your tax is figured on before the cap is even applied.
You can only claim the homestead on one property, and the paperwork is usually handled at or shortly after closing. If you're buying, ask your title company and county auditor about filing so you don't miss it for the year.
Why Two Similar Homes Can Have Different Bills
Two nearly identical houses on the same street can carry different tax bills. The differences come from whether each owner filed the homestead deduction, when the home last sold, prior assessment history, and any additional deductions (such as those for veterans or seniors) that one owner qualifies for and the other doesn't.
That's why we tell buyers to look at a property's actual assessed value and deductions, not just last year's tax figure — the number can change once the home changes hands. Fold estimated taxes into your monthly payment with our mortgage calculator.
How Taxes Fit Into Your Closing
Property taxes in Indiana are generally paid in arrears, which means at closing they're prorated between buyer and seller. Your title company handles that math as part of escrow.
Understanding your cap helps you budget for the actual bill after you move in, rather than being surprised by it.
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Frequently Asked Questions — Property Tax Caps (Indiana)
Do property tax caps apply automatically?
The cap itself applies automatically, but the lower 1% homestead cap only kicks in once you've filed the homestead deduction on your primary residence. Filing that paperwork is the step people most often miss.
Will my property taxes go up after I buy?
They can. The prior owner's deductions don't transfer to you, and the assessment may change, so the seller's old tax figure isn't a guaranteed preview of yours. Always confirm the current assessed value and eligible deductions.
Are property tax caps the same in every Indiana county?
The 1%, 2%, and 3% caps are statewide, but local tax rates differ by county, city, and school district, so two homes with the same cap percentage can still owe different amounts.