Indiana rewrote how homeowner property taxes are calculated in 2025. The changes started on this year’s bills and keep phasing in through 2031. For most homeowners in Jeffersonville, Clarksville and New Albany, though, the biggest factor on the bill isn’t the new law. It’s Indiana’s 1% cap.

Key terms, in plain English

How is an Indiana homeowner’s property tax calculated?

Indiana works in four steps: deductions, rate, cap, then credits.

1. Start with your home’s assessed value.
2. Subtract the standard deduction, then the supplemental deduction. That gives you net assessed value.
3. Multiply net assessed value by your district’s tax rate.
4. If that number is more than 1% of your gross assessed value, the 1% cap lowers it.
5. Subtract credits, including the new homestead credit.

Step 4 is why the deduction changes matter less than headlines suggest in many Southern Indiana cities.

What exactly does SEA 1 change?

The standard deduction shrinks each year, the supplemental deduction grows, and a new credit comes off the final bill.

Bill years shown. The law lists these by assessment date, one year earlier ($40,000 for the 2026 assessment, paid in 2027). That’s why some articles say the deduction "ends in 2030" while your bill won’t show it until 2031.

On top of that:

• Homestead credit: 10% of your bill, up to $300, starting with 2026 bills. It’s automatic if your homestead deduction is on file.
• Over-65 credits: Homeowners 65 and older may qualify for a $150 credit, and some also qualify for a credit that limits yearly bill increases to 2%. Income and value limits changed during 2025, so confirm eligibility with the county auditor. Both require an application, filed by January 15.
• Blind or disabled credit: $125, replacing the old deduction.
• Rental homes and farmland get a new deduction of their own, phasing in over several years.

What are the tax rates in Clark and Floyd counties?

City tax districts in Southern Indiana run roughly $2.75 to $3.70 per $100 of net assessed value for 2026.

Source: Indiana DLGF certified 2026 budget orders for Clark and Floyd counties. Other districts (Sellersburg, Charlestown, Georgetown and more) have their own rates. Check your bill or the county auditor.

What does this mean for a $250,000 home? (illustrative)

In the city districts above, the 1% cap sets the bill now, and the $250 credit is what’s new.

Here’s a $250,000 homestead in the City of Jeffersonville, 2026 bill:

Illustrative. Excludes any voter-approved referendum levies, which sit outside the cap, and any other credits.

Without the new credit, this owner would pay $2,500. With it, $2,250. That’s about $21 a month less in escrow. The bill in New Albany City or Clarksville would land in the same spot, because the cap applies there too.

Now versus 2031, same home

Here’s how the same $250,000 home looks if its value and the tax rates stayed exactly the same (they won’t, see the next section):

Illustrative, holding assessed value at $250,000 and 2026 tax rates constant. Credit applied each year.

The pattern: In high-rate city districts, the 1% cap does most of the work today and keeps doing it. In lower-rate areas that aren’t capped, the bigger deductions show up directly on the bill.

Will my bill actually go down?

Not necessarily, for three reasons.

1. Rates are likely to rise. Local governments set budgets (levies), and the rate is the levy spread over net assessed value. As deductions shrink everyone’s net value, rates tend to go up to raise the same dollars. Homeowners already at the 1% cap are protected from that. Homeowners below the cap aren’t.
2. Assessed values change. If your home’s value rises, so does your 1% cap.
3. Local income taxes are changing too. SEA 1 also restructures local income taxes. A 2026 law moved that part to 2029.

People read the trade-off differently. Supporters said about two-thirds of Hoosier homeowners would see a lower bill in 2026 than in 2025. Critics argue the law mostly slows increases rather than cutting bills, shifts more of the load to lower-valued homes over time, and may be offset by new local income taxes later. Both camps agree the impact varies a lot by home value and tax district.

What should Southern Indiana buyers know?

Price ≠ payment, and in Indiana, the homestead filing is part of the payment.

• File your homestead deduction right after you buy. If you close in 2026, file by January 15, 2027 to get the deduction (and the new credit) on your 2027 bill. Without it, a home is taxed under the 2% cap for non-homestead property, which can make the bill roughly twice as high or more.
• Budget from the 1% cap. In the city districts above, 1% of the home’s value, minus the credit, is a solid starting estimate for taxes.
• Look at the seller’s bill, then adjust. If the seller had senior credits or another district’s rate, your bill will differ.

Comparing both sides of the river? See KY vs. IN property taxes: the real dollar difference and what Jefferson County’s 2026 tax bills look like. If you’d commute into Louisville, add tolls and income taxes.

What should current owners, retirees and landlords check?

• Current owners: Confirm your homestead deduction is on your bill, especially if you refinanced, retitled, or moved a deed into a trust.
• Retirees: Ask the county auditor about the $150 over-65 credit and the 2% increase limit. For the bigger picture, see is Indiana a good state to retire in?
• Landlords: Rentals are capped at 2% and get their own new deduction. See investment property: Louisville vs. Southern Indiana.

How do Shepherdsville, Elizabethtown and Louisville compare?

Kentucky works differently: no 1% cap and no general homestead deduction under age 65, so the bill is mostly assessed value times the local rate. Elizabethtown buyers, for example, pay about $0.91 to $1.22 per $100 depending on tax district (see buying a home in Elizabethtown, step by step). Shepherdsville and Louisville have their own combined rates. The October Louisville market update has current prices on both sides.

Your next steps

1. Pay your fall installment by November 10, 2026.
2. Find your district and rate on your bill or the county auditor’s site.
3. Check your homestead status and, if you’re 65 or older, ask the auditor which senior credits you qualify for.
4. Buying in 2026? File your homestead deduction by January 15, 2027.
5. Comparing homes? Estimate taxes at 1% of value minus the credit in capped districts, and run the full math in lower-rate areas.

Frequently Asked Questions

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