Indianapolis Property Taxes - A Question

This is a week of tax questions. If you have been a reader here for any time at all, you know the Indianapolis property tax issue is a favorite of mine  

The following question came from someone who is starting their search for a home in Avon a city just west of Indianapolis. I love working with people who really do their research and am happy to help people with their real estate questions

The question: We're getting ready to look at some properties in Indianapolis (actually, more towards Avon) and I'm having trouble finding what the property tax is to calculate into my estimated payment. Could you help me out with that?

Of course, I am happy to help – here’s my answer:

In Indiana, there are currently no set taxes, as in a percentage. Each city determines their budget needs, then applies property tax based on the needs of government for that particular year, by applying a percentage to the assessed value. 

Currently, in Avon, property taxes average 1.5-2.0% of assessed value. Assessed value is usually fairly close to actual value, then we have specific exemptions for homeowners who meet criteria for those exemptions.

The standard (most common) exemptions are Homestead (owner occupied) and Mortgage, which together equal $48,000 or 50% of the property's assessed value, whichever is less.

It plays out something like this. A $200,000 home in Avon with an assessed value of the same, with a mortgage exemption and homestead exemption filed, at a rate of 1.75% would pay $1330.00 semi-annually. Assessed value - $200,000 (minus) Mortgage Exemption - $3,000 (minus) Homestead Exemption - $45,000 Equals - $152,000 X 1.75 =$2660.00/2 = $1330.00 The same home without the exemptions filed would pay $1750. semi annually.

The peculiarity of our taxes are, they are paid in arrears, so the taxes due in November will be for taxes assessed for the last half of last year. A buyer who was purchasing a home today would receive a tax credit from the seller for the last half of last year and all of 2008 taxes due, up to the date of close. In this case, it would equal about $3192.00. Then the buyer would be responsible for any future taxes from the date of closing.

In March, legislation was passed to lower taxes in the State of Indiana and those new rates will be effective for the year 2009, payable in 2010. For 2009 taxes, payable in 2010, the maximum rate for owner occupied homes will be 1.5%. In 2010, payable in 2011, taxes will be capped at 1.0% for owner occupied homes. Whether they will keep the exemptions in place when the rate is capped has yet to be determined. If they do, it will be a bonus. By 2010, the same $200,000 home (with exemptions) will pay $760.00 semi-annually. Without the exemptions, it will be $1000.00 semi-annually. 

**Update** January 2011 Although exemptions are still in place, they do not have an impact on reducing the assessed value.