Senate Enrolled Act 1 (2025) did not just tweak Indiana's homestead deduction — it replaced the entire structure over five years. The standard homestead deduction steps down every year and disappears entirely by pay-2031, while the supplemental homestead deduction climbs from 40% to 66.7% of remaining assessed value over the same window.
We covered the first step of that transition in our 2027 homestead deduction preview. This post is the full reference: every year, every figure, verified against the DLGF's June 12, 2025 Cockerill memo ("Legislation Affecting Deductions, Exemptions, and Credits"), which quotes the amended statutes directly.
How the Two Deductions Work Together
Under Ind. Code 6-1.1-12-37 and 6-1.1-12-37.5, a homestead's taxable value is computed in two steps:
- Standard deduction: a flat dollar amount subtracted from gross assessed value (AV).
- Supplemental deduction: a percentage of whatever AV remains after the standard deduction.
SEA 1 moves relief out of step 1 and into step 2. A fixed dollar deduction is worth relatively more to a low-value home; a percentage deduction scales with value. That design choice drives everything in the table below — including who wins and who loses.
One statutory guardrail survives the transition: the supplemental deduction may not exceed 75% of the property's gross assessed value (Ind. Code 6-1.1-12-37.5).
The Full Schedule, 2026-2031
Standard deduction amounts come from Section 44 of SEA 1 (amending Ind. Code 6-1.1-12-37), stated by assessment date. Supplemental percentages come from Section 45 (amending Ind. Code 6-1.1-12-37.5), stated by pay year. Both are quoted verbatim in the DLGF memo. Remember Indiana's one-year lag: the January 1, 2026 assessment drives the bill payable in 2027.
The worked example uses a home with a $250,000 gross AV, held constant across all six years so the policy change is the only thing moving.
| Pay year | Assessment date | Standard deduction | Supplemental % | Supplemental $ (on $250K home) | Net taxable AV ($250K home) |
|---|---|---|---|---|---|
| 2026 | Jan 1, 2025 | $48,000 | 40% | $80,800 | $121,200 |
| 2027 | Jan 1, 2026 | $40,000 | 46% | $96,600 | $113,400 |
| 2028 | Jan 1, 2027 | $30,000 | 52% | $114,400 | $105,600 |
| 2029 | Jan 1, 2028 | $20,000 | 57% | $131,100 | $98,900 |
| 2030 | Jan 1, 2029 | $10,000 | 62% | $148,800 | $91,200 |
| 2031+ | Jan 1, 2030 and after | $0 | 66.7% | $166,750 | $83,250 |
Reading one row: for pay-2028, the $250,000 home subtracts the $30,000 standard deduction, leaving $220,000; the 52% supplemental deduction takes another $114,400; and the tax rate applies to the remaining $105,600.
Every cell in the standard-deduction and supplemental-percentage columns matches the statutory text quoted in the DLGF memo; the dollar columns are straightforward arithmetic from those figures.
Note
For assessment dates before January 1, 2025, the standard deduction was the lesser of 60% of AV or $48,000, and the supplemental deduction was 37.5% (on the first $600,000 of remaining AV). SEA 1 replaced both formulas: the standard deduction is now a flat dollar amount that steps down, and the supplemental deduction is a single flat percentage that steps up.
What the Table Actually Means for Your Bill
Higher-value homes: deductions grow
For the $250,000 example, net taxable AV falls every single year — from $121,200 in pay-2026 to $83,250 in pay-2031. Total deductions rise from 51.5% of gross AV to 66.7%. If your home is worth more than roughly $108,000, the arithmetic works in your favor: the growing percentage eventually outweighs the shrinking flat deduction.
Lower-value homes: deductions shrink
Below that rough $108,000 crossover, the trade goes the other way. Take an $80,000 home. In pay-2026 it deducts $48,000 plus 40% of the remaining $32,000 ($12,800) — $60,800 total, or 76% of AV (trimmed to the 75% cap, i.e., $60,000). By pay-2031 the same home deducts only 66.7%, or $53,360. Its taxable value rises from $20,000 to $26,640 even though nothing about the property changed. Owners of modest homes are the group most exposed to this transition.
The tax bill still depends on rates
Net taxable AV is only half the equation. Local levies, the new levy controls in SEA 1, referendum debt, and the 1% homestead circuit-breaker cap all shape the final bill. A falling taxable AV does not guarantee a falling bill if rates move against you.
The Supplemental Homestead Credit: 10% Up to $300
Separate from the deductions, SEA 1 added a supplemental homestead credit (Ind. Code 6-1.1-20.6-7.7) for property taxes first due and payable in calendar years beginning after December 31, 2025 — so it starts with the pay-2026 bill and continues in later years. The credit equals the lesser of:
- 10% of the homestead's property tax liability for the year, or
- $300.
Referendum-approved taxes are excluded from the calculation. This credit comes off the bill after the rate is applied, so it stacks on top of the deduction math above. We break down the mechanics, timing, and edge cases in our guide to how the $300 homestead credit works.
Warning
Do not confuse the credit with the deductions. The deductions reduce the assessed value your rate applies to; the credit is subtracted from the dollar bill afterward. Both appear on your tax statement, in different places, and an error in either one is worth catching.
What Else Changed Around the Homestead
The homestead transition sits inside a larger cleanup. SEA 1 also:
- Expired a list of smaller deductions effective with the 2025 assessment date, including the solar, wind, hydroelectric, geothermal, and residential rehabilitation deductions. This continues the consolidation that began when the separate mortgage deduction was folded into the homestead deduction — see our post on the mortgage deduction repeal aftermath.
- Converted the Over 65 and Blind/Disabled deductions into credits (maximums of $150 and $125 respectively), with new income limits for the Over 65 credit.
- Created a phased 2% circuit-breaker deduction for non-homestead residential property, long-term care property, and agricultural land: 6% of AV for pay-2026, rising in steps to 33.4% for pay-2031 and after.
If you are verifying your own eligibility or filing status, start with our Indiana homestead exemption guide — the qualification rules did not change, but the dollar consequences of missing the filing now shift every year.
Check Your Statement Every Year Through 2031
The practical takeaway: your homestead math changes every single pay year through 2031. County auditors apply these figures across millions of parcels, and a transition with six different formulas in six years is exactly the environment where clerical errors happen — a standard deduction applied at the wrong year's amount, a supplemental percentage from the prior schedule, a missing credit.
Pull your parcel in our Indiana property explorer to see your assessed value and how it compares to neighboring homesteads, or use the property lookup tool to review your record card. If the underlying assessed value itself looks high — and with the deduction cushion shrinking for many owners, every dollar of AV matters more each year — our tax appeal service builds the comparable-sales evidence and files on your behalf.