Indiana just passed the most sweeping property tax reform in a generation, and if you own a home in Southern Indiana, you need to understand what is changing — because some of these changes help you, some are a wash, and some could affect you in ways that are not immediately obvious.

Senate Bill 1 (SB 1), signed into law following the 2025 legislative session, promises $1.3 billion in homeowner savings. That sounds great on paper. But the reality is more nuanced, especially for homeowners in Clark, Floyd, Harrison, Scott, and Washington counties who are already dealing with rising assessments and tight household budgets.

Here is what the law actually does, who benefits, and what every Southern Indiana homeowner should be doing right now to make sure they are not leaving money on the table.

The New Homestead Tax Credit: Immediate Relief for Most

The headline provision of SB 1 is a new annual property tax credit for every homestead property in Indiana. Starting with taxes payable in 2026, every eligible homestead will receive a credit equal to 10 percent of their property tax bill, up to a maximum of $300.

This is a straight dollar-for-dollar reduction in what you owe. If your property tax bill is $2,500, you get a $250 credit. If your bill is $3,000 or more, you get the full $300.

There are additional credits for specific groups:

• Homeowners age 65 and older receive an additional credit of $150
• Disabled veterans receive an additional credit of $250

These credits stack on top of the base 10 percent credit. A 68-year-old homeowner with a $3,200 tax bill could see $450 in credits ($300 base plus $150 senior credit), reducing their bill to $2,750.

According to the Indiana Senate, two-thirds of all homeowners are expected to see a 2026 property tax bill that is lower than their 2025 bill. Nearly all homeowners will see some level of relief compared to what they would have owed under the previous law.

The Homestead Deduction Phase-Out: The Other Side of the Coin

Here is where it gets complicated. While SB 1 adds the new credit, it also begins phasing out the traditional standard homestead deduction that Indiana homeowners have relied on for years. The phase-out schedule is gradual but significant:

• 2025 (current year): Up to $48,000 standard deduction plus 37.5 percent supplemental deduction
• 2026: Up to $40,000 standard deduction plus 40 percent supplemental deduction
• 2027: Up to $30,000 standard deduction plus 46 percent supplemental deduction
• 2028: Up to $20,000 standard deduction plus 52 percent supplemental deduction
• 2029: Up to $10,000 standard deduction plus 57 percent supplemental deduction
• 2030 and beyond: Standard deduction fully eliminated, supplemental deduction rises to 66.7 percent

The idea is straightforward: replace a flat deduction system with a percentage-based credit system. In theory, the rising supplemental deduction percentage offsets the declining standard deduction. But the math does not work the same way for every homeowner.

Who Wins and Who Loses

Homeowners with lower-assessed properties (under approximately $200,000) generally come out ahead in the first few years, thanks to the new 10 percent credit. The credit delivers a real dollar benefit that outweighs what they lose from the deduction phase-out.

Homeowners with higher-assessed properties (above approximately $300,000) may see a more mixed result over time. As the standard deduction shrinks, their taxable assessed value increases, and the $300 cap on the new credit does not scale up to compensate fully. By 2029 and 2030, some higher-value homeowners could end up paying more than they would have under the old system.

For most homeowners in Southern Indiana, where median home values in Clark and Floyd counties remain well below $300,000, the net effect in 2026 and 2027 should be positive. But this is worth monitoring year over year as the deductions phase down.

The Property Tax Deferral Option: A Lifeline for Struggling Homeowners

Perhaps the most significant provision for homeowners in financial distress is the new property tax deferral option. Under SB 1, counties now have the authority to allow homeowners to defer up to $500 of their property tax bill each year, up to a cumulative maximum of $10,000, until the home is sold.

This is not a forgiveness program — the deferred taxes become a lien on the property and must be paid when the home is sold or transferred. But for homeowners on fixed incomes, particularly seniors and people dealing with temporary financial hardship, this deferral option can be the difference between keeping their home and losing it at a tax sale.

Key details about the deferral:

• Participation is optional for counties — your county government must choose to adopt the deferral program
• The deferral is aimed specifically at owner-occupied homesteads
• The annual cap is $500, with a lifetime maximum of $10,000
• Deferred amounts become a lien that is settled when the property is sold

As of this writing, it remains to be seen which Southern Indiana counties will adopt the deferral program. Homeowners who are interested should contact their county auditor or treasurer to ask whether the program will be available in their area.

Protections for Seniors, Disabled Homeowners, and Veterans

SB 1 includes important changes to how tax benefits work for Indiana's most vulnerable homeowners. Previously, seniors, blind and disabled residents, and eligible veterans received property tax deductions. The problem with deductions is that they only work if your tax bill exceeds the cap amount. For homeowners whose bills were already at or below the property tax cap, deductions provided zero benefit.

SB 1 converts these deductions into credits. This is a meaningful change because credits reduce your tax bill dollar for dollar regardless of whether you are at the cap. A senior homeowner who got no benefit from the old deduction system because of the cap will now receive a real reduction in their bill.

What This Means for Homeowners Facing Financial Pressure

If you are behind on property taxes, facing a potential tax sale, or struggling to keep up with rising property costs, here is what you should do right now:

1. Verify your homestead exemption is on file. The new credits only apply to homestead properties. If you have not filed your homestead exemption with your county auditor, you will not receive the 10 percent credit. Contact your county auditor immediately to verify your status.

2. Check whether you qualify for additional credits. If you are 65 or older, a disabled veteran, or meet other qualifying criteria, you may be eligible for additional credits beyond the base 10 percent. These credits are not always applied automatically — you may need to file an application.

3. Ask about the deferral program. Contact your county treasurer or auditor to find out if your county is adopting the new tax deferral option. If so, this could provide breathing room if you are struggling to pay your full tax bill.

4. Review your assessed value. If you believe your home is assessed for more than it is actually worth, you have the right to appeal. Lowering your assessed value reduces your tax bill across the board. In Indiana, you can file an appeal with your county assessor — the deadline is typically June 15 for the current tax year.

5. Understand the tax sale timeline. In Indiana, if you fall behind on property taxes, the county can sell your tax lien. Knowing the timeline and your redemption rights is critical. Indiana gives homeowners a redemption period of 120 days after the tax sale to pay the delinquent taxes plus fees and reclaim their property.

Concerns About Funding Local Services

It is worth noting that SB 1 has drawn significant criticism from local government officials, school administrators, and public safety advocates who warn that the tax cuts could reduce funding for schools, fire departments, and emergency services. These concerns are legitimate and worth following, particularly in smaller communities where local government budgets are already stretched thin.

For homeowners, the takeaway is this: property tax reform is a double-edged sword. The short-term savings are real, but the long-term effects on local services — the quality of schools, the availability of fire protection, the condition of local roads — are part of the equation too.

The Bottom Line

SB 1 delivers meaningful relief for most Indiana homeowners in 2026, particularly those with modest home values and those who qualify for senior or veteran credits. The new tax deferral option, if adopted by your county, provides a genuine safety net for homeowners in financial distress.

But this is a law that changes over time. What works in your favor in 2026 may shift by 2028 or 2029 as the deduction phase-out accelerates. Stay informed, verify your exemptions, and do not assume the credits will be applied automatically. Take the steps now to make sure you are receiving every dollar of relief you are entitled to.