How To Read Your Property Tax Bill

Here's a typical property tax bill, for a homeowner in Tippecanoe County, Indiana, with its property and personal identity information removed.  Most property tax bills in Indiana look like this, though counties can adopt any format approved by the State Board of Accounts.  You can take a look at this bill, and click on any part of it to read an explanation.  Or, scroll down to find an explanation of any section of the bill. 

Taxable property comes in two categories, real property and personal property.  Real property is land and buildings; personal property is almost entirely business, farm and utility equipment and inventories.  Your tax bill is a bill for the tax on real property, your land, house and any other improvements to the property.

Property tax reassessment, and the tax restructuring passed by the Indiana General Assembly on June 22, 2002, will affect most of the entries on your tax bill when they take effect starting with tax bills in 2003.  Each section below has a special box describing these effects.



Assessment Year/Payable Year
Property tax bills are labeled with two years.  This is because property is assessed in one year for taxes payable in the next.  For example, if a property is assessed on March 1, 2001, the taxes on the property will be due in May and November, 2002.  This is similar to the income tax--the taxes you pay by April 15 are on the income earned the year before.  The first year listed on the tax bill is the assessment year.  The second "pay year" or "payable year" is the year in which the taxes are due.
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Tax Delinquency
What if you don't pay your property taxes?  The state has established a series of steps to handle "tax delinquency."  The taxpayer who pays late must pay a penalty.  If taxes are not paid for a year, the property is subject to auction at a tax sale, held by the county, usually in the Fall.  Selling a delinquent property at a tax sale is a way for local governments to collect the taxes owed from a bidder.  The bidder then has a lien on the property.  The original owner can clear his or her title to the property by paying the bidder the bid plus another penalty.  If this payment is not made, the bidder becomes the new owner of the property.
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Property taxes are paid in two equal installments, due on May 10 and November 10 each year.  The installment labeled "A" is the May installment; the installment labeled "B" is the November installment.  Most of the tax payment figures on the tax bill are for one installment only.  Taxpayers must multiply by two to see the total paid in a year.

Links to More Information

To Find: Go To:
Detailed calendar of assessment and tax payment deadlines. Department of Local Government Finance website

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Parcel Identification
The parcel number, duplicate number, and property description are all ways for the assessor, auditor and treasurer to identify the parcel of property to be taxed.
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Taxing District
A taxing district is an area with a particular combination of government jurisdictions, and a particular tax rate.  All taxpayers live in a county, a township and a school corporation.  Most live in cities or towns, library districts and one or more special districts.  The total tax rate is the sum of the tax rates of all the units in which the property resides.  The tax district is an area within the jurisdiction of a particular county, township, school corporation and other units, where the tax rate is the same.

Links to More Information

To Find: Go To:
Names of all Indiana taxing districts, by county (click on "tax rates" PDF or Excel file) Department of Local Government Finance website

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Total Tax Rate
The total tax rate is the sum of the tax rates of the governments in which the property resides.  A property will be in the state, of course, and in a county, township and school corporation.  All total tax rates are the sum of the state, county, township and school corporation rates.  Most property is also in a city or town, a library district, and one or more special districts.  The total tax rate will also include these rates.  The total tax rate owed on a particular parcel depends on the sum of the rates in all the overlapping jurisdictions, which define the "tax district" in which the parcel resides.  

Reassessment and tax restructuring will cause almost all tax rates to fall a lot in 2003.  There are two main reasons.  First, reassessment will increase assessed values in every jurisdiction, but the state's property tax controls prevent the tax levy (the amount collected from the property tax) from rising very much.  The property tax rate is calculated by dividing each jurisdiction's levy by its assessed value.  With the levy almost unchanged and assessed value going way up, the tax rate will come down.  Second, restructuring cut the overall tax levy by about one billion dollars, by creating a new state aid program to replace 60% of property taxes raised by school corporations for their general funds.  With less revenue to be raised with the property tax, tax rates will fall.


Links to More Information

To Find: Go To:
Tax rates by taxing district for 2002 (click on "tax rates" PDF or Excel file) Department of Local Government Finance website
Tax rates by taxing district for 1997-2001 Department of Local Government Finance website

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Homestead Credit Rate
The homestead credit is a percentage to be subtracted from a homeowner's tax bill after the gross amount owed is calculated.  The statewide homestead credit rate is currently 10%.  In a few counties (like Tippecanoe), the rate can be as high as 18%.  The tax owed on a property is the product of its assessed value and the total tax rate.  For houses that are the primary residence of a homeowner, this amount is reduced by the 10% homestead credit.  This would cost local governments revenue, except that the state pays local governments for lost credit revenue out of the state budget. 

Some counties with the County Option Income Tax (COIT) have pledged income tax revenue to homeowner tax relief.  COIT counties can raise the local credit from 10% to a rate as high as 18%, but they must use COIT revenue to replace the lost property tax revenue, before the COIT revenue is distributed to local governments in the county.  Tippecanoe County does this, and that's why the homestead credit is listed on the bill at 18%.

Restructuring increased the statewide homestead credit rate from 10% to 20%.  Starting in 2003, however, homestead credits will be calculated after property tax replacement credits are subtracted, rather than before as in the above bill.  This means that the credit has not quite doubled in value.

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Replacement Credit Rate
Property Tax Replacement Credits (PTRC) are a state program of tax relief, created during the Bowen Administration's tax reforms in 1973.  Originally, the sales tax was increased from 2% to 4%, and the revenue pledged to the property tax replacement fund.  Revenue from this fund was to be paid to all local governments to reduce their property taxes by 20%.

By the early 1980s it was found that the sales tax revenue from the added 2 percentage points was not enough for the annual PTRC payments.  Since then an additional appropriation is made by the state from its other revenues (like individual income and corporate income taxes).

Also in the early 1980s, the kinds of property tax collections eligible for property tax replacement credits was limited.  In particular, property taxes collected for debt service on bonds issued after 1984 were made ineligible for PTRC payments.  Debt service payments are outside the property tax controls.  The state was concerned that paying 20% of local unit debt service might encourage more borrowing and construction that was necessary.  This means that PTRC rates are now less than 20% in almost every taxing district, and that they vary by district.  Districts made up of overlapping units that have more debt service have lower rates (because less of their total property taxes are eligible for PTRC).  

The rate shown on the tax bill is for the taxing district where the property is located.  This percentage is subtracted from the taxpayers tax payment.  All property, residential and non-residential, real and personal, is eligible for this PTRC reduction.


Restructuring has changed the way the property tax replacement credit rate is calculated.  Starting in 2003, PTRC will apply only to real property (land and buildings), not personal property (business equipment and inventories).  This will reduce the replacement credit rate. 


Links to More Information

To Find: Go To:
Replacement credit rates by taxing district for 2002 Department of Local Government Finance website
Replacement credit rates by taxing district for 1997-2001 Department of Local Government Finance website

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Gross Assessed Value
The assessed value is the dollar figure assigned to your property by the local assessor.  It is the taxable value of your property.  The product of this value and the property tax rate determines your tax bill.  One or two numbers will appear in this part of the bill.  The number labeled "L" is the assessed value of the land.  The number labeled "I" is the assessed value of the improvements (buildings, mostly). 

Assessors value real property during reassessment years, which occur at irregular intervals, statewide.  There were statewide reassessments for assessment years 1979, 1989 and 1995.  There's a reassessment in 2002.  

Improvements (buildings) are assessed at their replacement costs, less depreciation.  Replacement cost is calculated based on how much it would take to build the building at 1991 construction costs.  Depreciation is based on building age--the older is the building, the greater the percentage subtracted from replacement cost.  Land is valued based on the selling prices of similar parcels of vacant land in the neighborhood.

On this tax bill, Indiana assessed values are not based on "market value."  This house has been appraised at $160,000, but it's gross assessed value is $101,800.  The assessor didn't do the assessment wrong--when the assessment rules are used correctly they come up with a value that isn't the house's predicted selling price.  The sum of the assessed value figures listed on your tax bill is unlikely to bear any relationship to the price for which you could sell your property.  Indiana was one of only two states (Nevada is the other) that didn't base assessments on market value.

Assessment practices have been very controversial in Indiana.  In fact, in December 1998, the Indiana Supreme Court found the methods used by assessors to calculate assessed values to be unconstitutional.  The court ordered the Department of Local Government Finance (DLGF) to come up with new, constitutional rules.  With help from the 2002 Special Session of the General Assembly, DLGF has done that.  The rules being used in the 2002 pay 2003 reassessment effectively will make Indiana a market value state.

Reassessment will increase the gross assessed value of most real property in Indiana.  In effect, starting in 2002 pay 2003 real property will be assessed at its market value.  Your idea about what your house could sell for should be a good estimate of its assessed value.  If your assessment comes in at much more than this, your property has been over-assessed.  If the assessment is much less than your property's potential sale price, your property has been under-assessed.


Links to More Information

To Find: Go To:
Information on the reassessment scheduled for 2002, and the constitutionality of the assessment system. This website, Property Tax Reassessment 
Data on total assessed value, by county and state totals, for the years 1977 through 2000. This website, Property Tax Summary data
Data on assessed value by local government unit, 2001. This website, County Budget Data
Data on real and personal assessed value by county and taxpayer category (e.g. Residential, Industrial, Agricultural etc.), for 1999-2000. Department of Local Government Finance website

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Exemptions and Deductions
Exemptions and deductions are dollar amounts that qualifying property owners can subtract from the assessed value of their property, before the tax bill is calculated.  The most common exemption is the mortgage exemption.  This exemption is labeled "M" on this tax bill.  The mortgage exemption is $3,000.  This means that $3,000 is subtracted from the assessed value of the home, before the tax owed is calculated. 

The standard deduction is labeled S on this tax bill.  It is currently $6,000.  The standard deduction is also known as the homestead standard deduction, and should not be confused with the homestead credit.  Homeowners eligible for the homestead credit are automatically eligible for the standard deduction.  The standard deduction is limited to one-half of the property's assessed value.  For example, if the assessed value of the home is only $3,000, the maximum standard deduction is $1,500.  Otherwise, the taxable value of a home is reduced by the full $6,000 before the amount owed is calculated.  

The standard deduction was created in 1989 for taxes payable in 1990.  It's purpose was to protect homeowners from tax increases generated by the 1989 pay 1990 statewide reassessment.  

With the mortgage and standard deductions, most homeowners see $9,000 subtracted from their assessed values before the tax is calculated.

Other exemptions include:

Taxpayers must apply for exemptions at their county auditor's office.

Restructuring increased the value of the homestead standard deduction from $6,000 to $35,000.  Starting with tax bills in 2003, $35,000 will be subtracted from the gross assessed value--the market value of the property--before tax payments are calculated.


Links to More Information

To Find: Go To:
Pamphlets describing many of the exemptions and deductions available to Indiana property taxpayers (Unavailable due to revision as of August 2002). Department of Local Government Finance website

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Net Taxable Value
This is also called "net assessed value."  It is the taxable value of the property after all deductions and exemptions.  Sometimes two numbers appear.  A number labeled "R" is the residential portion of assessed value, which is eligible for homestead credits.  A number labeled "NR" is the non-residential portion, not eligible for homestead credits.  In this tax bill, the whole taxable value is eligible for homestead credits.

The sum of the net taxable value figures should equal the sum of the assessed values listed under gross assessed value, minus the sum of the standard deduction and all the exemptions.  On the tax bill here, the gross assessed value is $101,800 ($34,200 land plus $67,600 improvements).  Deductions and exemptions total $9,000.  Total net taxable value is $92,800.

Reassessment and restructuring will change this calculation.  This house was recently appraised at $160,000.  That should be close to its new market value assessment.  Subtracting the new $35,000 homestead standard deduction and the $3,000 mortgage deduction leaves $122,000.  This is the new net taxable value.

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Gross Tax Each Installment
These numbers are the product of the total tax rate and the net taxable value.  Divide the tax rate by 100 (because it is shown as "dollars per $100 assessed value), then multiply the result by each figure under net taxable value.  The result is the total gross tax owed on each part of net taxable value.  Then divide by 2, because the tax bill is for one of the two annual installments.  The result should be the numbers listed as gross tax each installment.

On the tax bill here, the total tax rate is 3.7312.  That's $3.7312 per $100 assessed value.  Residential taxable assessed value is $92,800.  Multiply by the tax rate (after dividing by 100) and you get $3,462.55.  Divide by two to get the payment for this installment, and it's $1,731.28. 

Reassessment and restructuring will change this calculation, but it can't be predicted for sure by how much.  The taxable assessed value will increase to about $122,000.  The tax rate will come down, but how much can only be guessed at.  Perhaps $2 per $100 assessed value.    Multiply this rate by the new taxable assessed value gives $2,440.  Divided by two is $1,220 per installment. 


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Homestead and Replacement Credit
The homestead and replacement credits are the percentages under the homestead credit rates and replacement credit rates, times the gross tax each installment.  The homestead credit rate (10% statewide, plus 8% in Tippecanoe) is multiplied only by the residential portion of the gross tax, because it is a tax break for homeowners only.  On this tax bill, the gross tax is eligible, so the homestead credit is $311.63.

The property tax replacement credit rate varies by taxing district.  All property is eligible for this credit.  On this tax bill, the property tax replacement credit rate is 12.5709%.  On a total gross tax of $1,731.28, that's $217.64.

In 2001, Indiana's state government paid local governments $195 million in homestead credits and $886 million in property tax replacement credits.

Reassessment and restructuring will change this calculation, too, but again it can't be predicted for sure by how much.  The replacement credit rate will fall, perhaps to 8% on this tax bill.  The homestead credit rate will rise to 20%.  Starting with the installment payment of $1,220, an 8% replacement rate reduction is $97.60, leaving $1,122.40.  The homestead credit is subtracted from this figure, not from the original $1,220 (this is a restructuring change in the calculation).  At 20%, the homestead credit is $224.48.


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Net Tax
The net tax is the gross tax minus the homestead and replacement credits.  Unless there are delinquency penalties or other adjustments, this is the tax owed for this installment.  The total property tax bill for the year is double this amount, because taxes are paid in two installments.

On this tax bill, the gross tax is $1,731.28, the homestead credit is $311.63, and the replacement credit is $217.64.  The net tax bill is the gross tax minus the credits, or $1,202.01.  The annual payment is double this amount, $2,404.02.

In 2000 Indiana local governments collected $4.9 billion in net property taxes.

Reassessment and restructuring will change this calculation, but once again it can't be predicted for sure by how much.  The gross tax for this installment might be $1,220, the replacement credit could be $97.60, and the homestead credit could be $224.48.  That leaves a net tax of $898.22, and a total tax bill for both installments of $1,796.44.  The current tax is $2,404.02, so that's a 25% tax cut.  Estimates for all homeowners statewide put the average tax cut at about 13%.  Newer homes like this one have current assessments that are closer to market value, and the tax bills on such homes will go down more.


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Current Tax Breakdown
The current tax breakdown is "for your information."  It is not used in the calculation of your tax bill.  It shows the governments which will receive your tax payment, and how much each will receive.  Some bills print these in dollar terms--the county might be listed as receiving $250 of the taxpayers payment, for example.  Here, the figures are shown in percentage terms.

You'll notice that the school corporation receives the largest share of your tax payment, 59.6% on this tax bill.  Statewide, school corporations receive about half of all property tax collections.  In some rural areas, school receive more than two-thirds of the revenue.  The county and the city or town (if there is one) get the next biggest amounts.  On this bill there is a separate listing for "welfare," which is a county function.  Statewide, schools corporations, counties and cities/towns receive over 90% of property tax collections.  That's certainly true on this tax bill--the school, city, and county (including welfare) get 97% of the tax payment. The state government gets just a little.  The state tacks on a one cent per $100 assessed value rate to each tax bill.  That adds up to about $6 million for the state each year.  Local governments receive about $5 billion.  The property tax is primarily a local tax.

Restructuring will reduce the share of the school corporations in total property taxes.  This is because of the new state aid program that will replace 60% of the school general fund taxes.  The school share on this tax bill will probably fall to about 50%, with all the other shares increasing a little so the total still adds up to 100%.


Links to More Information

To Find: Go To:
Data on property tax levies and rates for jurisdictions within each county, 2001. This Website, Local Budget Data

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County Treasurer
The county treasurer sends out the tax bills and receives your tax payment.  Two other county officers are involved in the property tax system.  The county assessor usually keeps the county's assessment records, and to some degree supervises and assists the township assessors in their assessing duties.  The county auditor takes these assessment information and adds the credit, deduction and exemption information to get net taxable value.

Links to More Information

To Find: Go To:
Detailed calendar of assessment and tax payment deadlines. State Board of Tax Commissioners Website
Links to Indiana local government offices with websites, by county. Website
Names and addresses of all county Treasurers, and other local officials. State Board of Accounts Website, Roster of State and Local Officials

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