Indiana Tax Exemptions Complete 2025-2026

Indiana Tax Exemptions Complete 2025-2026 – Indiana offers a wide range of tax exemptions, deductions, and credits to help residents, seniors, veterans, families, and businesses reduce their tax burden. With major property tax reforms passed in 2025 through Senate Enrolled Act 1 (SEA 1) and House Enrolled Act 1427 (HEA 1427), 2025–2026 brings significant changes—especially for homeowners and businesses. This comprehensive guide covers everything you need to know for the 2025 and 2026 tax years, based on official sources from the Indiana Department of Revenue (DOR) and Department of Local Government Finance (DLGF).

Major Property Tax Changes in Indiana for 2025–2026

Indiana’s 2025 legislative session delivered historic property tax relief estimated at $1.3 billion. Key updates include phasing out the standard homestead deduction while boosting the supplemental deduction, introducing a new 10% homestead credit (capped at $300), dramatically increasing the business personal property tax exemption threshold, and converting some senior and disability deductions into credits.

These changes apply to property assessed as of January 1 (with taxes payable the following year). Most existing homeowners automatically receive updated benefits, but new applicants or those with ownership changes must file by specific deadlines.

Homestead Deductions and the New 10% Credit

The standard homestead deduction (for your primary residence) remains $48,000 for the 2025 assessment year (payable in 2026) but phases out over five years:

  • 2026 assessment: $40,000
  • 2027: $30,000
  • 2028: $20,000
  • 2029: $10,000
  • 2030 and beyond: $0

The supplemental homestead deduction increases gradually:

  • Payable in 2026: 40% of remaining assessed value (after standard deduction)
  • Rising to 66.7% by 2031 (capped at 75% of gross assessed value total)

Starting with 2026 property tax bills, qualifying homesteads also receive a new 10% homestead credit (up to $300 maximum). Homeowners already receiving the homestead deduction qualify automatically.

New non-homestead residential deduction (for rental properties) and a farmland deduction begin phasing in at 6% in 2026, reaching 33.4% by 2031.

Senior Citizen, Disabled, and Veteran Property Tax Relief

Over 65 Credit (replaces the former Over 65 Deduction starting 2026 bills): Up to $150 credit. Eligibility expanded—no maximum assessed value limit. Adjusted gross income (AGI) limit: $60,000 (single) or $70,000 (joint). Must have owned the property for at least one year and reside there. Counties may auto-convert prior recipients, but new or changed eligibility requires filing by January 15, 2026.

Over 65 Circuit Breaker Credit: Prevents property tax liability from rising more than 2% year-over-year for eligible seniors. Income limits increased and assessed-value limits removed.

Blind/Disabled Credit: $125 credit (replaces former deduction). No income limit, but documentation of status required. Apply by January 15, 2026 if newly eligible.

Veterans Exemptions and Deductions:

  • Totally disabled veterans: Full exemption on homestead property (constitutional protection).
  • Service-connected disability deductions: Reinstated and available (HEA 1427 reversed some earlier changes).
  • Surviving spouses of certain veterans may qualify for additional relief. Contact your county auditor for exact eligibility.

Business Personal Property Tax Exemptions

One of the largest changes benefits businesses:

  • De minimis exemption remains $80,000 for the January 1, 2025 assessment but jumps to $2 million for the January 1, 2026 assessment (and beyond). Most businesses will now be fully exempt from filing and paying business personal property tax.
  • The 30% depreciation floor is eliminated for new tangible personal property acquired after January 1, 2025 (with limited TIF protections).

This change is expected to exempt the vast majority of small and mid-sized businesses while preserving most of the tax base.

Additional partial exemption available for employer-provided on-site childcare facilities (effective 2026).

Full Property Tax Exemptions

Certain properties or owners qualify for complete (100%) exemptions, including:

  • Religious, educational, charitable, and scientific organizations (IC 6-1.1-10-16).
  • Government-owned property and specific public uses.

Applications must be filed with the county assessor by April 1 of even-numbered years (refiling every two years unless exempt status is continuous). Contact your county assessor’s office for forms and details.

Indiana Sales Tax Exemptions (2025–2026)

Indiana’s state sales tax rate is 7% (plus any local add-ons). Major exemptions include:

  • Food and food ingredients (groceries—not prepared meals).
  • Prescription drugs and most medical equipment/supplies.
  • Agricultural production items and machinery.
  • Manufacturing equipment and certain utilities used in production.
  • Sales for resale (with valid certificate).
  • Government entities and qualifying nonprofits (Form ST-105 required).
  • Most services (unless specifically taxable).

New or expanded exemptions:

  • Restaurants (75%+ prepared food sales): 50% sales tax exemption on electricity usage via Form ST-200R (no utility study needed).
  • Data centers, quantum computing research, advanced computing, and defense infrastructure: Expanded sales tax exemption with IEDC Specific Transaction Award Certificate (STAC).

Use Form ST-105 (General Sales Tax Exemption Certificate) for most entity/use-based exemptions.

Indiana Income Tax Deductions, Credits, and Rate Reductions (2025–2026)

Indiana’s individual income tax rate drops to 3.0% for tax year 2025 and 2.95% for tax year 2026.

Key deductions and credits include:

  • 100% military pay deduction (expanded to Space Force, USPHS, and NOAA commissioned officers).
  • Military retirement and survivor benefits deduction (same expanded eligibility).
  • Dependent child exemption increase (up to $3,000 in the first year a new child is claimed).
  • Various business and economic development credits (affordable housing, railroad infrastructure, small modular nuclear reactors, physician practice ownership, historic rehabilitation).
  • Other credits: Earned Income Tax Credit conformity, childcare expenditure credit (extended), and more.

New 2026 provisions from 2025 legislation include exemptions for certain tip and overtime wages and loan interest on American-made vehicles (per legislative summaries).

File using Form IT-40 (resident) or IT-40PNR (nonresident). Many credits require separate applications or Schedule IN-OCC.

How to Claim Indiana Tax Exemptions and Credits?

  • Property tax deductions/credits: File with your county auditor (most common forms available online or at the auditor’s office).
  • Sales tax exemptions: Provide Form ST-105 or specific forms (ST-200R for restaurants) to vendors or file directly with DOR.
  • Income tax: Claim on your annual return; some credits need pre-approval via DOR forms.
  • Full property exemptions: File with county assessor by April 1 (even years).

County auditors are the primary contact for property tax questions. Use INTIME (DOR’s online portal) for sales and income tax filings.

Important Deadlines for 2025–2026

  • January 15, 2026: Property tax deduction/credit applications (for 2026 payable bills) for seniors, disabled, new homesteads, etc.
  • April 1 (even years): Full property tax exemption applications with assessor.
  • April 15, 2026 (or extension): Individual income tax returns for 2025 tax year.
  • Business personal property returns: Due with county assessor (if over exemption threshold).

Official Resources and Next Steps

  • Indiana DOR: in.gov/dor (forms, INTIME portal, Tax Chapter guide)
  • DLGF: in.gov/dlgf (property tax deductions/credits and exemptions)
  • County Auditor/Assessor offices: Best source for local property questions
  • Indiana Taxpayer Advocate Office: For hardship or unresolved issues

Tax laws can be complex and eligibility depends on your specific situation. Always verify with official sources or consult a tax professional or your county auditor for personalized advice. Information is current as of early 2026 based on DOR and DLGF publications and 2025 legislation.

Save this guide and check in.gov/dor or in.gov/dlgf regularly for any updates. Indiana’s tax relief measures are designed to put more money back in the pockets of Hoosier families and businesses—make sure you claim everything you’re entitled to!