Indiana Replacement LIT Scoreboard: Who Has Imposed Through Mid-2026

SB 1 gave every Indiana county fiscal body authority — effective July 1, 2025 — to impose up to a 1.2% replacement Local Income Tax (LIT) to offset the property tax operating-levy freeze. A year in, the patterns are clear, and they're not uniform.

This is the Indiana replacement LIT scoreboard as of mid-2026: who imposed, who declined, who's still debating, and what it means for residents and commuters across the state.

What the replacement LIT is and isn't

A quick refresher. The replacement LIT is not a wholly new tax — it's an additional rate stacked onto the existing county LIT (which most Indiana counties already had at rates between 1.0% and 2.0%). The replacement portion can be up to 1.2 percentage points, and the combined county-plus-municipal cap is 2.9% effective 2028. For 2026 and 2027, the county portion is the only piece being decided.

The decision-makers are county fiscal bodies:

Marion County: the City-County Council (consolidated city-county government — see our deep dive on Marion's decision)
Other counties: the County Council

Full mechanics in our SB 1 LIT replacement explainer.

The mid-2026 scoreboard

Looking at action across Indiana's 92 counties through May 2026, three broad cohorts emerge.

Cohort A: Imposed (largely urban / high-service-demand)

A meaningful share of urban and dense-suburban counties imposed at least a partial replacement LIT in the July 2025 – April 2026 window. Patterns:

Counties with major school districts under cap-loss pressure (IPS in Marion, Lake County districts)
Counties with substantial public-safety operating budgets that couldn't absorb a levy freeze without service cuts
Counties with large commuter inflows (workers commuting in pay LIT to the work county, not the home county) — making the LIT partially externalized

Counties that imposed include (representative — see DLGF for the authoritative list):

Marion County — partial rate, effective Jan 1, 2026
Lake County — partial rate, focused on school and public-safety backfill
Allen County — partial rate
Several Indianapolis-metro doughnut counties — partial rates

The aggregate revenue across imposing counties is meaningful but well below what a uniform 1.2% imposition would have generated. Even imposing counties largely picked partial rates rather than the full authority.

Cohort B: Declined (largely rural / low-service-demand)

A large group of rural agricultural counties have explicitly declined the replacement LIT, often after public hearings demonstrating substantial constituent opposition. Patterns:

Lower per-capita government service spending baseline — levy freeze is manageable on existing revenue
Politically conservative tax environments — any new tax is unacceptable to median voters
Smaller population means smaller LIT revenue at any given rate — the upside is limited

Counties that declined include (illustrative):

Adams, Benton, Carroll, Crawford, Daviess, Fountain, Newton, Parke, Pike, Switzerland, Vermillion, Warren, Washington — and others in similar profiles
Several agricultural counties in the Wabash and Ohio River corridors

For residents of these counties, no replacement LIT means full benefit from the SB 1 property tax cuts with no offsetting income tax increase — pure net positive for owner-occupied homestead taxpayers.

Cohort C: Still debating

A surprisingly large middle group is still in active debate. Some have held first-reading hearings without final action; others have postponed decisions to the 2026 budget cycle in late summer / early fall. Patterns:

Mid-sized counties with mixed service profiles
County Councils with closely-divided political composition
Counties with active commercial expansion (especially LEAP-style or data-center projects) that may generate new tax base without LIT

The deferral isn't necessarily anti-LIT — many of these counties are waiting to see 2026 budget cycle pressure before committing.

What it means for residents

The replacement LIT redistributes burden by household type. Four illustrative households across cohorts:

Owner-occupied homestead in an imposing county

Property tax relief from SB 1: ~$270 savings on a typical $250K AV
LIT increase: ~$350 on $70K household income at 0.5% replacement LIT
Net: ~$80 worse off

Owner-occupied homestead in a declining county

Property tax relief from SB 1: ~$270 savings on a typical $250K AV
LIT increase: $0
Net: ~$270 better off

Renter in an imposing county

Property tax relief: $0 directly (landlord passes some through, depending on lease structure)
LIT increase: $350 on $70K income at 0.5%
Net: ~$350 worse off

Cross-county commuter (lives in declining county, works in imposing county)

Property tax relief in home county: ~$270
LIT increase paid to work county: ~$350
Net: ~$80 worse off — and you have no political representation in the work county that's collecting your LIT

The cross-county commuter case is the most politically charged. A Hendricks County resident working in Marion pays Marion's LIT — including any replacement portion — but votes in Hendricks. This creates real estate dynamics that are starting to show up in housing-market data: residents may "re-shore" their employment to home counties where possible to avoid the work-county LIT.

What's coming for 2027 and 2028

The 2026 picture is partial. The 2027 picture sharpens, and the 2028 picture introduces municipal LIT authority.

2027

Counties that deferred 2026 decisions face a second budget cycle with the 2027 levy growth cap (1%) — fiscal pressure intensifies for service-dependent counties
Expect more imposing-cohort additions in fall 2026 budget cycles
A small number of imposing counties may expand their replacement LIT rate as 2027 budget needs become clearer

2028

Municipal LIT authority opens under SB 1
Cities and towns within counties get their own LIT authority on top of the county's
Combined county + municipal cap: 2.9%
Counties already at 1.2% replacement LIT leave only 1.7% of municipal headroom, distributed among all cities/towns in the county
Big cities (Indianapolis, Fort Wayne, Evansville, South Bend) gain new political leverage — they can impose municipal LIT independent of county will

The combined cap is the binding constraint. Counties already at maximum replacement LIT can't expand further in 2028; only their cities can.

How to check your specific county

Visit the DLGF Local Income Taxes page — the authoritative source for current LIT rates
Find your home county (where you reside on Jan 1) and your work county (where you earn wages)
Compare 2025 vs. 2026 rates — any increase reflects replacement LIT decisions
Confirm your January 2026 paycheck withholding matches the published rate

If your withholding differs from the published rate, check with your employer; payroll systems sometimes lag rate updates by a pay cycle.

What to do

Confirm your LIT rate through the DLGF source.
Model your household impact — property tax relief vs. LIT increase, using your specific AV and income.
Track 2027 county budget cycles — county fiscal bodies will re-debate LIT levels each fall.
Plan for 2028 — municipal LIT authority adds another layer.
If you commute across county lines, model both counties' LIT positions, as your tax burden depends on the work-county side.