For Indiana manufacturers, distributors, and any business that runs on expensive equipment, one line in SB1 quietly changed the math on owning depreciable assets. The bill removed the 30% depreciation floor on new business personal property. Over the life of your equipment, that's a meaningful reduction in taxable value, and it's worth understanding exactly how it works.
What the 30% floor was
Indiana taxes business personal property (BPP), machinery, equipment, furniture, fixtures, and other depreciable business assets, based on a depreciated value derived from cost.
Under the old rule, depreciation could only take an asset's reported value so far. No matter how old or worn the equipment was, its assessed value could not drop below 30% of its original cost. That 30% was the floor. A 15-year-old machine that had economically depreciated far below 30% of cost was still taxed as if it retained roughly a third of its value, indefinitely.
For equipment-heavy operations, that floor created a permanent tax base on assets long past their useful prime.
Why the floor mattered most to certain businesses
The 30% floor bit hardest where capital is heavy, long-lived, and slow to turn over: manufacturing lines, food processing, fabrication shops, logistics and warehousing fleets of fixed equipment, and printing or packaging operations. A business that holds machinery for fifteen or twenty years was paying tax on roughly a third of original cost for a decade or more after the equipment had economically depreciated far below that level. Service businesses with light, fast-cycling equipment felt the floor less, because their assets often left the books before depreciation would have pushed value under 30% anyway. The floor's removal therefore delivers the most relief to exactly the operations that carried the heaviest long-tail BPP base.
What SB1 changed
SB1 removed the 30% floor for new depreciable business personal property placed in service on or after January 1, 2025. For qualifying new assets, depreciation can now carry assessed value below the old 30% minimum as the equipment ages.
The key qualifiers:
- Applies to new depreciable BPP
- Placed in service on or after January 1, 2025
- Pre-2025 assets generally remain under the prior rules
| Asset age | Old rule (with floor) | New rule (floor removed) |
|---|---|---|
| New | Full reported value | Full reported value |
| Mid-life | Depreciated value | Depreciated value |
| Well-aged | Held at ~30% of cost | Continues depreciating below 30% |
The benefit isn't immediate. A brand-new machine is taxed on its full value either way. The advantage compounds over time, as your post-2025 equipment ages past the point where the old floor would have kicked in.
How this lowers your assessed value
The practical effect: assets you buy now will, in later years, carry a lower taxable value than identical assets bought before 2025. That lowers the BPP assessed value you report and the tax that flows from it.
Plan around this on a multi-year basis. The savings show up in years three, five, and beyond, exactly when older equipment used to plateau at the 30% floor. For capital planning, it modestly improves the long-run carrying cost of new equipment versus extending the life of pre-2025 assets.
Worked example
Take a $1,000,000 machine placed in service in 2025, owned by a business well above the exemption threshold. As it ages, depreciation reduces its reported value. The illustration below contrasts the old floor with the new rule using approximate, simplified figures.
| Years in service | Old rule reported value | New rule reported value |
|---|---|---|
| New | ~$1,000,000 | ~$1,000,000 |
| Mid-life | ~$400,000 | ~$400,000 |
| Well-aged | ~$300,000 (floor) | ~$150,000 |
Under the old rule, the machine could not be assessed below approximately $300,000 no matter how old it got. Under the new rule, the same asset can continue depreciating, here to roughly $150,000 in its later years. At a 3%-tier effective rate, that roughly $150,000 difference in reported value is a meaningful annual saving, and it repeats every year the asset stays in service below the old floor. The exact depreciation percentages come from the state schedules; the point is that the plateau is gone for qualifying post-2025 assets.
Interaction with the $2 million exemption
Indiana exempts a business from BPP tax when its total acquisition cost of business personal property in a county falls under a threshold (commonly referenced as the $2 million exemption). The two provisions work on different levers:
- The exemption can take you out of BPP tax entirely if your total acquisition cost stays under the threshold.
- The floor removal lowers the assessed value of new equipment for businesses that are above the threshold and still paying.
If you're under the exemption, the floor change may not move your bill, you're already exempt. If you're over it, the floor removal is where your savings live. For the wider SB1 picture, see Indiana SB1 property tax reform 2026.
The threshold rose to $2 million
The exemption is measured per county on total acquisition cost of business personal property. Effective January 1, 2026, that threshold rose to $2,000,000 in acquisition cost per county. A business whose total acquisition cost in a given county stays under $2 million is exempt from BPP tax for that county, while a business above it remains taxable on its reportable assets.
Two details trip people up. First, the test is per county, so a company operating in several counties measures its acquisition cost separately in each one and can be exempt in some and taxable in others. Second, the test is on acquisition cost, the original cost of the assets, not their depreciated value, so the floor removal does not push you under the exemption; it only lowers the assessed value of assets you already have to report.
| Provision | What it does | Who it helps |
|---|---|---|
| $2M exemption (per county, eff. Jan 1, 2026) | Removes BPP tax entirely below the threshold | Smaller filers under $2M acquisition cost per county |
| 30% floor removal (new BPP, in service on/after Jan 1, 2025) | Lets new equipment depreciate below 30% of cost | Equipment-heavy filers above the threshold |
Note
Because the exemption is tested on acquisition cost while the floor removal works on depreciated value, the two provisions never cancel each other out. Map your assets county by county to see which one applies where, then confirm both with the DLGF personal property guidance.
Warning
The exemption does not file itself, and the floor removal does not eliminate your reporting duty. You must still file a personal property return to claim the exemption or report depreciable assets. Skipping the filing because "we're exempt anyway" can forfeit the exemption and trigger penalties.
What businesses should do
- Keep filing. Removal of the floor and the exemption both still require a timely personal property return, typically Form 103 (or Form 104 as the summary), even when you believe you are exempt.
- Tag your in-service dates. The January 1, 2025 line is what separates floor-removed assets from the rest, your fixed-asset records need to support it.
- Model the multi-year benefit. The savings build as post-2025 equipment ages, so reflect it in capital plans, not just this year's return.
- Check your county threshold status. Knowing whether you're under or over the $2 million exemption, county by county, tells you which provision actually helps you.
Mistakes to avoid
- Skipping the return because "we're exempt." Filing is still required to claim the exemption. Not filing can forfeit the exemption and trigger penalties.
- Treating the exemption as company-wide. It is tested per county on acquisition cost; multi-county operations must run the test in each county.
- Confusing acquisition cost with depreciated value. The exemption looks at original cost; the floor removal looks at depreciated value. They use different figures for different purposes.
- Losing track of in-service dates. Without records that pin assets to on or after January 1, 2025, you cannot support the floor-removed treatment if challenged.
- Assuming pre-2025 assets benefit. The floor removal applies to qualifying new BPP placed in service on or after January 1, 2025; older assets generally stay under the prior rules.
Common questions
Does the floor removal apply to equipment I already owned before 2025? No. It applies to new depreciable BPP placed in service on or after January 1, 2025. Pre-2025 assets generally remain under the prior rules, including the old floor.
If I'm under the $2 million exemption, does the floor removal save me anything? Generally no, because you are already exempt from BPP tax in that county. The floor removal helps filers above the threshold who are still paying.
Do I still have to file if I'm clearly under the exemption? Yes. You must still file the personal property return (Form 103/104) to claim the exemption. Skipping it can cost you the exemption and add penalties.
Is the $2 million exemption measured for my whole business or per location? Per county, based on total acquisition cost of BPP in that county. You can be exempt in one county and taxable in another.
BPP sits in the 3% cap tier alongside commercial property; understanding that ceiling rounds out the picture in Indiana property tax caps and circuit breakers explained.
Find Your Property
Review your business parcels and personal property accounts. Start statewide at /indiana, or pull a specific location such as /indiana/marion to see assessment and class details.
Our property lookup helps you confirm how a business parcel is assessed and classed, and our tax appeal team can review BPP assessments and classifications. For statute detail, the KSM SB1 summary and the DLGF are reliable references.